Exelon (EXC) to Gain From Cost Management & $27B Investment

Exelon Corporation EXC has a strong foothold in every stage of the energy business and is well poised to benefit from organic investment, cost-management initiatives, debt reduction as well as the hedging program.

Exelon — which currently has a Zacks Rank #3 (Hold) — has to adhere to stringent regulations and deal with the possibility of a rise in uranium prices, which in turn can increase the cost of operations.

Tailwinds

Exelon invests substantially in infrastructure projects, in addition to expanding renewable and fossil fuel generating capacity. After investing $6.5 billion in 2020 in Utility operation, Exelon plans to invest nearly $27 billion over the 2021-2024 time frame in regulated utility operations for grid modernization and increasing the resilience of its infrastructure for the benefit of customers.

Utility customers across Exelon’s service territories benefited from tax reforms, energy efficiency programs and cost-saving initiatives undertaken by the company. Since 2015, Exelon has announced more than $1.1 billion of cost reductions that have benefited customers. EXC’s ongoing cost-saving initiatives will further benefit customers going forward.

Exelon's hedging program involves the safeguarding of commodity risks for expected generation. As of Sep 30, 2021, the proportion of expected generation hedged was 96-99% for 2021.

Headwinds

Exelon’s generation and energy delivery businesses are highly regulated and could be subject to regulatory and legislative actions that adversely affect operations or financial results. If the government’s decision relating to uranium usage is against the company, there is a possibility that an increase in the cost of uranium used in nuclear plants can result in an abrupt rise in operating expenses.

Price Movement

Shares of Exelon have gained 27.8% in the past 12 months compared with the industry’s 8.7% growth.

Zacks Investment Research

Image Source: Zacks Investment Research

Stocks to Consider

Some better-ranked utilities in the same sector include Duke Energy Corporation DUK, NiSource Inc. NI and California Water Service Group CWT, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Duke Energy, NiSource, and California Water Service delivered an average earnings surprise of 2.3%, 2.3%, and 10.8%, respectively, in the last four quarters.

The Zacks Consensus Estimate for 2021 earnings per share of Duke Energy, NiSource, and California Water Service has moved up 0.2%, 1.5%, and 7.6%, respectively, in the past 60 days.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Exelon Corporation (EXC) : Free Stock Analysis Report

NiSource, Inc (NI) : Free Stock Analysis Report

Duke Energy Corporation (DUK) : Free Stock Analysis Report

California Water Service Group (CWT) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research