Exelon (EXC), the largest competitive utility in the country, has outperformed broader utilities (XLU) in the past year and is trading at a yield similar to peers. It’s also among the few SPX utilities that are trading at a reasonably discounted valuation right now.
Volatile earnings, volatile stock
Exelon is the largest utility holding company in the country by revenue, but it has huge exposure to competitive operations, which makes its earnings volatile.
In 2012, Exelon’s net income was $1.16 billion, while it was $1.13 billion in 2016, representing flat growth. Volatile prices of natural gas since 2014 influenced wholesale power prices, which negatively impacted the bottom lines of competitive utilities (EXC) (FE). Due to relatively higher exposure to competitive operations, Exelon’s profitability has become more unstable.
Exelon’s dividend growth has also been distressing for investors over the past few years.
Adding to the woes
One severe setback for Exelon is its relatively expensive nuclear generation. Exelon is the largest nuclear power producer in US, and nuclear is becoming highly uneconomical due to relatively cheaper natural gas-fired power plants. Exelon is seeking government aid to run these plants lucratively. You can read more about this in Why US Nuclear Power Generation Is under Serious Threat.
Continue reading below for a look at Exelon’s financial and operational characteristics in detail.