Why Exelon’s recent quarterly earnings were positive

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Earnings beats guidance

Exelon Corporation (EXC) reported a net income of $440 million in its 2Q14 earnings. The quarterly net income was $14 million lower year-over-year (or YoY). The diluted earnings per share (or EPS) was $0.51—compared to $0.53 in the same quarter last year. For the second quarter, Exelon guided the street with an EPS range of $0.40–$0.50 per share.

All of its subsidiaries performed better-than-expected for the quarter. Exelon stated that it’s confident it will achieve its full-year guidance earnings of $2.25–$2.55 per share.

2Q Results

Exelon’s negative points in the quarter were:

  • Low energy prices affected revenues
  • Reduced output from both nuclear and fossil power plants—due to outages
  • Lower output pushed the operating and maintenance expenses higher

Exelon’s positive points in the quarter included:

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  • Capacity pricing increased—related to the reliability pricing model (or RPM) for the PJM market. The model sets the price of electricity for power companies operating in the region—based on demand.
  • Growth in revenue across utility subsidiaries
  • Lower tax expense as a result of tax repair deductions at PECO

Major developments

In its continuous efforts to strengthen its utility division, Exelon proposed a merger with Pepco Holdings. This would be an all-cash deal. It should close by the second or third quarter next year. Also, Exelon entered into an agreement with its subsidiary—Constellation Energy Nuclear Group (or CENG)—in April. It will combine with its generation division.

Other companies—like First Energy (FE), PPL Corporation (PPL), and AES Corporation (AES)—have also met guidance in the quarter ending June 30, 2014. All of these companies are part of the Utilities Select Sector SPDR (XLU).

Visit the Market Realist Power Utilities page to learn more.

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