Tags: Exelon | power | prices | EXC

Exelon Hammered by Lower Power Prices

By    |   Friday, 16 March 2012 12:09 PM

Nuclear plant operator Exelon (EXC) is getting hammered by lower power prices, for now. The culprit is an oversupply of natural gas. But Exelon also has an ace up its sleeve: a planned merger with Constellation Energy (CEG) that could add valuable scale and financial clout when power prices rise.

Exelon is a holding company and a major wholesale energy player. The power generation subsidiary owns 11 nuclear generating stations. The PECO subsidiary delivers gas and electricity to customers in southeastern Pennsylvania and northeastern Maryland. The ComEd unit offers electricity to 3.8 million customers in Chicago and northern Illinois.

Revenues are slipping, though. For fourth quarter 2011, Exelon reported revenues of $3.9 billion, down from $4.5 billion a year ago. Net income for the quarter was 91 cents, up from 79 cents. For full-year 2011, the firm reported revenues of $18.9 billion, up from $18.6 in 2010.

Net income for 2011 was $3.75 per share, down from $3.87.

For 2012, analysts’ consensus earnings estimate has slipped to $3.03 per share. For 2013, the estimate has also dropped, and it’s now $2.83.

Low-cost energy

Exelon’s merger with Constellation Energy, a leading supplier of power and natural gas, would create the nation’s largest competitive power producer. And it also becomes a major low-cost, clean energy provider, analysts add.

The power player pays a hefty 5.4 percent dividend, which UBS analysts believe can be maintained through 2015.

Low energy prices, though, have hamstrung Exelon. Of the 18 analysts followed by Thomson/First Call, three have strong buy recommendations and three have buys, with 12 holds.

UBS analysts recently downgraded Exelon to neutral, citing lower future earnings. Exelon’s target price was also lowered to $40.

The company next reports on April 25.

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Friday, 16 March 2012 12:09 PM
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