On May 15, we have issued an updated research report on Exelon Corporation EXC. The utility firm continues with its strategic investments towards internal and inorganic projects. However, we are concerned about stringent government regulations and price volatilities, which may cast shadow on the company's future performance.
Exelon, a Zacks Rank #3 (Hold) stock, reported unfavorable result in first-quarter 2014. The company's bottom line lagged the Zacks Consensus Estimate. Also, the quarterly earnings decreased from the prior-year level primarily due to operational difficulties as a result of extreme weather conditions at the company's service territories.
It is evident from past records that Exelon is currently pursuing a systematic acquisition strategy. On Apr 30, 2014, the company entered into an agreement with Pepco Holdings, Inc. POM to acquire the latter. The company plans to complete the transaction in the second half of 2015. The transaction will enable the company to increase its scale of operations, thereby serving more customers. Earlier, the company has completed several important acquisitions, such as ETC ProLiance Energy and Constellation Energy.
In addition, Exelon is investing substantially for installation of smart meters and smart grids at its utilities operations, thereby providing reliable services to its customers. Over the next five years, the company plans to invest a total of $15 billion for infrastructure development activities.
Exelon continues to have a stable liquidity profile, including cash balance of $0.79 billion as of Mar 31, 2014 and available fund of $8.4 billion under its committed credit facilities. A strong financial position enables the company to improve its existing operations besides adding new assets to its portolio.
The company's effort towards maximizing shareholders' wealth through payment of regular dividend is appreciable. In first-quarter 2014, Exelon paid $0.27 billion as cash dividend.
On the flip side, Exelon's generation and energy delivery businesses are highly regulated. Any changes in regulations could interrupt the company's business plans, which in turn may impact its future performance.
Key Picks from the Sector
Some better-ranked stocks in the utilities industry include Black Hills Corporation BKH and NRG Energy, Inc. NRG, each carrying a Zacks Rank #1 (Strong Buy).
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BLACK HILLS COR BKH: Free Stock Analysis Report
EXELON CORP EXC: Free Stock Analysis Report
NRG ENERGY INC NRG: Free Stock Analysis Report
PEPCO HLDGS POM: Free Stock Analysis Report
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