Can Exelon Corp. (EXC) Keep the Earnings Streak Alive? - Analyst Blog

We expect utility major Exelon Corporation EXC to beat expectations when it reports first-quarter 2014 results on Apr 30, 2014.

Why a Likely Positive Surprise?

Our proven model does not conclusively show that Exelon is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP (Expected Surprise Prediction) and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here.

Positive Zacks ESP: This is because the Most Accurate estimate stands at 77 cents while the Zacks Consensus Estimate is 72 cents, resulting in +6.94% ESP. This is a meaningful and leading indicator of a likely positive earnings surprise.

Zacks #2 Rank (Buy): We note that stocks with Zacks Ranks of #1, 2 and 3 have a significantly higher chance of beating earnings. The Sell-rated stocks (#4 and 5) should never be considered while going into an earnings announcement.

The combination of Exelon‘s Zacks Rank #2 (Buy) and +6.94% ESP make us confident of a positive earnings beat on Apr 30.

What is Driving the Better-than-Expected Earnings?

Exelon continues with its steady effort towards improving the existing infrastructure while adding new assets to its portfolio. The company is continuously spending substantial amounts to upgrade aging properties and install smart meters backed by strong financial position. These initiatives will enable Exelon to provide reliable services to its customers.

In Dec 2013, the commissions gave approval to Exelon's two subsidiaries, Commonwealth Edison Company and Baltimore Gas and Electric Company, to raise their respective rate by a part of their actual appeal. Receiving rate hike approvals from the commissions will encourage the company to invest more for infrastructure development projects.

In addition, Exelon is engaged in cost-containment initiatives. During fourth-quarter 2013, the company's total operating expenses decreased 4.3% year over year. Exelon's steady cost-control efforts will enable it to improve its future margins.

Other Stocks to Consider

Here are some other utility companies worth considering as our model shows they have the right combination of elements to post an earnings beat this quarter.

Ameren Corp. AEE has an earnings ESP of +6.25% and carries a Zacks Rank #2 (Buy).

OGE Energy Corp. OGE has an earnings ESP of +4.17% and carries a Zacks Rank #2 (Buy).

PPL Corp. PPL has an earnings ESP of +4.41% and carries a Zacks Rank #2 (Buy).