How Long Will Exelon Corporation (EXC) Earnings Keep Falling?

Exelon Corporation (NYSE:EXC)Exelon Corporation (NYSE:EXC) will release its quarterly report on Wednesday, and investors are bracing themselves for what could be another disappointing report for the utility. Despite its promise as a major producer of nuclear power, Exelon earnings are likely to decline from their year-ago levels, continuing a troubling trend that has led to past dividend cuts and uncertainty about the company’s future.

Historically, Exelon Corporation (NYSE:EXC) has benefited greatly from its diversified portfolio of electrical generation capacity, with its nuclear power plants helping to give it a major competitive advantage when fossil-fuel prices were high. Lately, though, low natural gas prices have taken away that advantage, creating problems for the utility’s business model and depressing the price of the power it generates, hitting profits. Let’s take an early look at what’s been happening with Exelon over the past quarter and what we’re likely to see in its quarterly report.

Stats on Exelon

Analyst EPS Estimate $0.54
Change From Year-Ago EPS (11.5%)
Revenue Estimate $6.15 billion
Change From Year-Ago Revenue (3.3%)
Earnings Beats in Past Four Quarters 2

Source: Yahoo! Finance.

When will Exelon earnings bottom out?
Analysts have largely kept their views on Exelon Corporation (NYSE:EXC) earnings stable in recent months, leaving June-quarter estimates unchanged though reining in their full-year 2013 views by $0.02 per share. The stock, though, has continued to pose problems for investors, having fallen 14% since late April.

A large part of that drop came in late May, following very poor results from power-grid operator PJM’s auction of electrical capacity governing the 2016-2017 delivery year. With the grid operator managing to secure nearly 170 gigawatts of capacity at a price more than 55% below the previous year’s auction, analysts downgraded Exelon and rival FirstEnergy Corp. (NYSE:FE) because of the adverse long-term implications on electricity demand. New natural-gas-fueled power plants were a major part of the capacity jump, and as gas prices continue to remain relatively low, producers like FirstEnergy and Exelon Corporation (NYSE:EXC) are facing profit squeezes well into the future.

But Exelon Corporation (NYSE:EXC) isn’t giving up on the future prospects of nuclear energy. It filed renewal applications for two of its nuclear plants in May, seeking to get the multi-year process under way well before the 2024 to 2027 expiration dates of its current approval from the Nuclear Regulatory Commission. Industry rivals aren’t committed to nuclear power given the current price environment, as Duke Energy Corp (NYSE:DUK) decided to suspend its plans to build new nuclear plants in North Carolina, citing slowing growth in power demand as making the plants unnecessary as Duke turns its attention to modernizing its fossil-fuel plants.

Moreover, Exelon Corporation (NYSE:EXC) is looking at sources other than nuclear power for electricity generation. In its corporate sustainability report, the company not only touted safety and reliability but also more than 400 megawatts of wind power and 31 megawatts of solar generation it added in the past year.

In the Exelon Corporation (NYSE:EXC) earnings report, watch for signs of how the utility is handling the prospect of higher interest rates. The full brunt of higher financing costs won’t hit the company immediately, but over time, rising interest expense could produce a further headwind to Exelon’s profitability going forward.

The article How Long Will Exelon Earnings Keep Falling? originally appeared on Fool.com and is written by Dan Caplinger.

Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool recommends Exelon.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

6 Ways to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

10 High Paying Seasonal Jobs in America this Holiday Season

The 10 Busiest Shipping Lanes in the World

5 Most Valuable Brands in China

The 10 States with Highest Substance Abuse Rates Crippling Their Populace

The Top 10 Things to Do Before You Die That Will Echo for Eternity

The 10 Best Selling Items on Etsy

Top 10 Things to Do in Tokyo, the Greatest City in the World

10 Mistakes on Social Media that Can Harm You and Will Probably Get You Canned

The 10 Best Cities to Find Jobs in 2014

The 10 Most Controversial Songs Of All Time to Hit (and get Banned from) the Airwaves

The 20 Biggest IPOs in US History

The 10 Best Places to Visit in Mexico that Are Beautiful and Safe

7 Bad Habits that Age You Beyond Your Years

The 40 Best Fortune Cookie Sayings That Will Leave You Bemused, Befuddled, or Beguiled

10 Foods to Eat Before a Workout to Make Every Drop of Sweat Count

The 5 Best Documentaries On Netflix You Must See

The Most Heartwarming and Inspirational Story Of This Halloween Season, It Will Make You Cry and Jump For Joy

10 Best Party Songs of All Time to Bring the House Down With

5 New World Order Conspiracy Theories that Will Strangle the World

The 10 Highest Rated Movies of 2014

The 10 Largest Container Shipping Companies in the World

The 10 Largest Armies in the World: Who Should We Be Afraid Of?

Best Warren Buffett Quotes on Money You Need to Hear

The 10 Highest Suicide Rates by Profession

The 20 Most Underrated Movies of All Time

The 10 Fastest Growing Companies in America

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!