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Analysts’ Top 5 Favorite S&P 500 Utilities Stocks

PART:
1 2 3 4 5 6 7 8 9 10 11
Part 6
Analysts’ Top 5 Favorite S&P 500 Utilities Stocks PART 6 OF 11

Could Exelon Stock Offer a Decent Gain Potential?

Exelon’s price target

Exelon (EXC) is the largest utility holding company by revenue among the S&P 500 utilities (XLU). According to analysts’ consensus, Exelon has a mean price target of $41.19 against its current market price of $38.19. That suggests an estimated upside of 8.0% going forward.

Exelon is currently tracked by 20 analysts. Six of them have recommended a “strong buy” for the stock, and nine have recommended a “buy.” Five have rated the stock a “hold,” and none of them have rate it a “sell” as of October 5, 2017.

Could Exelon Stock Offer a Decent Gain Potential?

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Peer price targets

FirstEnergy (FE) stock has a mean price target of $34.47, implying an estimated upside of 10.0%. It’s currently trading at $31.35.

Entergy (ETR) has a mean price target of $79.60 against its current market price of $78.41. That indicates a possible gain of 1.5% going forward.

Valuation

Exelon is one of the few large-cap utility stocks that are currently trading at a discounted valuation. It has an EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) valuation multiple below 8.0x. Its five-year historical average valuation is near 8.0x. EXC looks to be trading at a significant discount compared to the peer average of 11.0x.

Exelon’s peer FirstEnergy (FE) is trading at an EV-to-EBITDA ratio of 8.5x, while Entergy (ETR) has a valuation ratio near 12.0x.

Competitive utilities such as Exelon and FirstEnergy have a large exposure to unregulated operations. The volatile earnings from these unregulated operations make their total earnings less stable. Consequently, the discounted valuation relative to their peers is most likely due to the volatile stock movements, driven largely by their volatile earnings.

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