NEW YORK (TheStreet) -- Shares of Pepco Holdings Inc. (POM) are soaring, up 17.77% to $26.84 in pre-market trade today, after Exelon Corp. (EXC - Get Report), the nuclear power company, agreed to buy the utility company for over $5.4 billion in cash, sources said, Bloomberg reports.
Exelon shares are up 1.11% to $36.58 in pre-market trade.
Pepco has a market capitalization of about $5.71 billion. It serves about 2 million customers in Delaware, Maryland and New Jersey.
The deal could be announced this morning.
TheStreet Ratings team rates PEPCO HOLDINGS INC as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:
"We rate PEPCO HOLDINGS INC (POM) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, growth in earnings per share and increase in net income. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Despite its growing revenue, the company underperformed as compared with the industry average of 3.4%. Since the same quarter one year prior, revenues slightly increased by 3.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- PEPCO HOLDINGS INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, PEPCO HOLDINGS INC reported lower earnings of $0.34 versus $0.95 in the prior year. This year, the market expects an improvement in earnings ($1.21 versus $0.34).
- Net operating cash flow has increased to $230.00 million or 32.94% when compared to the same quarter last year. Despite an increase in cash flow, PEPCO HOLDINGS INC's cash flow growth rate is still lower than the industry average growth rate of 44.78%.
- The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Electric Utilities industry average, but is greater than that of the S&P 500. The net income increased by 34.9% when compared to the same quarter one year prior, rising from $43.00 million to $58.00 million.
- The gross profit margin for PEPCO HOLDINGS INC is currently lower than what is desirable, coming in at 25.66%. Regardless of POM's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 5.31% trails the industry average.
- You can view the full analysis from the report here: POM Ratings Report