Exelon Beats Street, Reaffirms 2009
Posted on: January 23, 2009 - Email Article - Printable Version
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Before the bell today, Exelon Corporation [EXC: 41.65, -0.01 (-0.02%)], the largest United States utility company by market cap, reported fourth quarter 2008 earnings. For the quarter, the company earned a net income figure of $707 million, or $ 1.07 a share compared to $0.84 a share on net income of $562 million a year ago. This was a 26% increase. The consensus analysts’ estimate was $1.04 a share. On a full year adjusted basis, revenue dipped to $2.78 billion or $4.20 a share from $2.92 billion or $4.32 a share a year ago. The results were well within the company’s original full year guidance of $4.00 – $4.40 a share and comfortably in Exelon’s September adjusted guidance of $4.15 – $4.30 a share. In addition to the earnings beat, Exelon spread light on their expected performance in 2009. The company’s CEO, John Rowe, said on the earnings call that “We expect 2009 to be a year of many challenges, but we will work to mitigate the impact and are reaffirming our operating earnings guidance range of $4.00 to $4.30 per share.”
Exelon’s fourth quarter results were driven by significantly higher margins on their generation operations, primarily due to their increased usage of nuclear energy, with lower purchased power costs also contributing to their margin expansion. Furthermore, the company saw an increase of distribution revenue at their Commonwealth Edison Company, better known as ComEd. The Illinois utility subsidiary’s revenue increase came on the heals of a 2007 rate case increase. Finally, Exelon saw a substantial decrease in their interest expense at generation, in large part because they purchased less energy outside of operations in the fourth quarter of 2008.
Furthermore, the fourth quarter of 2008 saw Exelon make an offer, later turning hostile, to wholesale power company, NRG Energy [NRG: 21.4975, +0.4575 (+2.17%)]. The proposed merger would make Exelon the largest power generator by megawatts in the United States. In the earnings call, management at Exelon expressed that they will continue to pursue NRG, and that they have turned their efforts into finding independent nominees to serve on NRG’s board of directors. Exelon said it was committed to finding board members that “will fulfill their fiduciary duty by acting in the best interest of NRG shareholders.” Earlier in January, Exelon extended its $6.5 billion offer to NRG until February 25th.
In total, Exelon lost 27% of its total equity value in 2008, in line with the utilities composite which also lost approximately 27% of its value. As can be said about most utilities companies, Exelon was anything but the safe haven that companies in this steady sector historically known to be. However, with the industry’s top balance sheet and largest credit line, Exelon’s stature and growth have made it a top player in this industry now and looking forward. This same scope has put Exelon in position to make an acquisition like NRG, which will only increase the scale and market dominance of Exelon in the long term if it is to be finalized. In either case, Exelon has the make up of a best of breed company within the utilities sector, one of which that will continue to bring investors steady and stable earnings in the long term.
-T.J Smith
Disclosures: None.
The Following Stocks Were Mentioned In This Article: EXC, NRG
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