Exelon (EXC) Stock Falls Despite Pepco (POM) Acquisition

NEW YORK (TheStreet) -- Exelon Corp.  (EXC) fell Wednesday after the company announced it would become the largest U.S. power distributor thanks to the acquisition of Pepco  (POM).

Exelon will spend $6.83 billion, or $27.25 a share in cash, on Pepco to surpass Duke Energy  (DUK) as the largest power distributor in the country.

Despite this news, Exelon fell 3.15%, or $1.14, to $35.04 at the close of trading on Wednesday. More than 22.3 million shares changed hands, which easily surpassed the average volume of 7,144,470.

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Separately, TheStreet Ratings team rates EXELON CORP as a "buy" with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate EXELON CORP (EXC) a BUY. This is driven by several positive factors, 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 impressive record of earnings per share growth, largely solid financial position with reasonable debt levels by most measures, good cash flow from operations, notable return on equity and compelling growth 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:

  • EXELON CORP has improved earnings per share by 31.8% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. During the past fiscal year, EXELON CORP increased its bottom line by earning $2.00 versus $1.40 in the prior year. This year, the market expects an improvement in earnings ($2.37 versus $2.00).
  • The debt-to-equity ratio is somewhat low, currently at 0.88, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Despite the fact that EXC's debt-to-equity ratio is low, the quick ratio, which is currently 0.62, displays a potential problem in covering short-term cash needs.
  • Net operating cash flow has increased to $1,949.00 million or 23.82% when compared to the same quarter last year. Despite an increase in cash flow, EXELON CORP's cash flow growth rate is still lower than the industry average growth rate of 44.78%.
  • EXC, with its decline in revenue, slightly underperformed the industry average of 3.4%. Since the same quarter one year prior, revenues slightly dropped by 1.5%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • The company, on the basis of net income growth from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Electric Utilities industry average. The net income increased by 30.9% when compared to the same quarter one year prior, rising from $378.00 million to $495.00 million.
  • You can view the full analysis from the report here: EXC Ratings Report

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Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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