Why Exelon’s revenue growth has been slow



Slow growth

Exelon Corporation’s (EXC) revenue grew at an annual rate of 4.7% for the last six years. The revenue growth been slow. Most of the growth was achieved after Constellation Energy merged with Exelon in 2012. This shows that Exelon’s organic growth was flat over the last six years. It’s small revenue growth came from mergers and acquisitions.


Revenues relative to the industry

Even after the sluggish growth, Exelon still reports the highest revenue in the U.S. utilities industry. This shows how big Exelon was in the industry—compared to its competitors—in 2008. No other company managed to earn higher revenues—even after Exelon’s six years of flat growth.

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Exelon reported revenues of $24.9 billion last year. This was just enough to beat Duke Energy (DUK) by $0.3 billion. Other companies that have a high revenue share in the industry are Southern Company (SO) and AES Corporation (AES). They have revenues of $17.1 billion and $15.9 billion, respectively.

Falling operating margins

In addition to slow sales growth, investors haven’t liked Exelon’s falling operating margins. The operating margins have been hit by rising fuel expenses and purchased power costs. Exelon operates in the deregulated markets in the U.S.. These markets don’t protect utilities from rising costs.

Exelon’s operating margin dropped from 28.1% in 2008 to less than 15% last year. The margins fell each year to as low as 10.5% until 2012. The operating margin rebounded to 14.6% last year. The synergies of the merger with Constellation Energy started to reduce Exelon’s operating expenses.

The operating margin is an important metric for the Utilities Select Sector SPDR (XLU). The operating margin ensures that XLU gives the correct weight to utility stocks in its portfolio.


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