Exelon Corporation (EXC), an electric utility company, is scheduled to report its second quarter 2012 financial results before the opening bell on August 1, 2012.
First Quarter Snapshot
Exelon Corporation reported first quarter 2012 operating earnings of 85 cents per share, down from $1.17 per share reported in the year-ago quarter. Quarterly earnings surpassed the Zacks Consensus Estimate by 4 cents.
In the first quarter of 2012, Exelon’s total operating revenue was $4.7 billion, down 2.5% year over year. Reported quarterly revenue fell short of the Zacks Consensus Estimate of $6.3 billion.
Zacks Consensus
The Zacks Consensus Estimate for second quarter 2012 is 63 cents per share, lower than $1.05 recorded in the prior-year quarter. Currently, the Zacks Consensus Estimate for the company’s earnings ranges between 57 cents and 68 cents a share.
For full year 2012, the Zacks Consensus Estimate stands at $2.76 per share, lower than its full year 2011 earnings of $4.16 per share. The current Zacks Consensus Estimate for full-year earnings ranges between $2.58 and $3.05 per share.
Estimate Revisions Trend
Agreement
We have observed a few estimate revisions at this point. Of the 11 estimates for the second quarter, 2 were revised upward while 3 moved in the opposite direction in the last 30 days. There was no movement in estimates in the last 7 days.
For full-year 2012, out of the 15 estimates, 1 was revised upward while 2 were lowered in the last 30 days. In the last 7 days, estimates remained unchanged.
Some of the analysts believe that pending rate cases, erratic weather patterns in Exelon’s service areas and depressed margins at the company’s generation fleet may negatively impact the financial performance of the company in the second quarter and full-year 2012.
Magnitude
The Zacks Consensus Estimate for the upcoming quarter inched down by 2 cents over the last 30 days. In the last 7 days, the Zacks Consensus Estimate for second quarter earnings remained unchanged.
For full year 2012, the Zacks Consensus Estimate remained unchanged over both the last 7 and 30 days.
Surprise History
With respect to earnings surprises, Exelon has reported favorable earnings performance in the previous quarter as well as in the second and third quarters of 2011, surpassing the corresponding Zacks Consensus Estimates.
The fourth quarter 2011 earnings miss was, however, an exception. The earnings surprise in the last four quarter ranges from (6.8%) to 8.3%. The average surprise over the last four quarters remained a positive 2.3%.
Our Recommendation
Exelon recently completed its proposed merger with Constellation Energy. We expect this merger will improve Exelon’s position in terms of customer base and load capacity. This merger will also enable Exelon to work on operational efficiency upgrade and fuel innovation, which will subsequently help the company to lower its power production costs.
In addition, Exelon continues with its plants upgrade program, which is expected to produce additional 420 million watts of carbon-free power in the next five years. We believe this additional power generation will benefit the company in terms of increasing its market share in the future.
But we are skeptical about highly regulated utility generation and delivery environment in Exelon’s operating territories and unpredictable weather patterns, which may negatively impact the company’s future performance.
Currently, we are maintaining a long-term Neutral recommendation on Exelon Corporation. The company retains a Zacks #3 Rank, which translates into a short-term Hold rating.
Chicago, Illinois-based Exelon Corporation is a utility services holding company. It engages in the generation, transmission, distribution and sale of electricity to residential, commercial, industrial and wholesale customers. The company competes with Ameren Corporation (AEE).
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