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What Are Pepco Holdings’ Outlook and Price Targets?

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Market performance

Last year, the dry spell for utilities was brought to life by mergers and acquisitions in the sector. Pepco Holdings (POM) corrected 5%. In 2015, the utilities sector (XLU) observed many merger and acquisition activities. Utilities tried to brace their resources and infrastructure bases to expand their geographical proximities.

Large-capitalization companies were seen trying to accomplish accelerated growth through mergers and acquisitions by paying heavy premiums that were well above the industry standards for their target companies.

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Price targets

Wall Street analysts have given a price target of $26.42 to POM. It’s trading at $26.39 as of February 18, 2016.

Of the 11 analysts tracking POM, nine recommend it as a “hold,” while two recommend it as a “sell.” No analysts have “buy” recommendations on POM.

On the other hand, Exelon (EXC) has a price target of $33.50 for the next year. That’s an upside of 8% over its current market price of $31. AES (AES) has an estimated upside of 27% with a price target of $11.88. It’s trading at $9.40 as of February 18.

Pepco and Exelon deal

Pepco Holdings is a largely regulated utility (IDU), which will provide an incremental effect on Exelon’s regulated earnings. EXC is looking to expand its regulated operations to offer stable dividends to shareholders. The combined entity of Pepco and Exelon is expected to have a rate base of approximately $26 billion. The deal will certainly fortify Exelon’s presence in the Mid-Atlantic region.

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