Pepco is a holding company that through its public utility subsidiaries is engaged in the transmission, distribution and default supply of electricity and the distribution and supply of natural gas. Exelon is an energy provider and holding company for several energy businesses.
Exelon will purchase Pepco in an all cash transaction consideration of $27.25 per share, or about $6.8 billion, RTT News reports.STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.
The merger is expected to close in the second or third quarter of 2015 and Exelon is anticipating the acquisition "to be significantly accretive" to its adjusted earnings in the first year after the closing.
Shares of Pepco are lower by 0.11% to $27.11 and Exelon stock is down 0.26% to $34.20 in early after-noon trading on Tuesday.
Separately, 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, compelling growth in net income, good cash flow from operations, solid stock price performance and notable return on equity. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- POM's revenue growth has slightly outpaced the industry average of 5.4%. Since the same quarter one year prior, revenues slightly increased by 6.3%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
- The net income growth from the same quarter one year ago has greatly exceeded that of the S&P 500, but is less than that of the Electric Utilities industry average. The net income increased by 26.2% when compared to the same quarter one year prior, rising from $42.00 million to $53.00 million.
- Net operating cash flow has increased to $135.00 million or 21.62% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 2.11%.
- Compared to its closing price of one year ago, POM's share price has jumped by 44.57%, exceeding the performance of the broader market during that same time frame. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
- PEPCO HOLDINGS INC reported flat earnings per share in the most recent quarter. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, PEPCO HOLDINGS INC reported lower earnings of $0.41 versus $0.95 in the prior year. This year, the market expects an improvement in earnings ($1.22 versus $0.41).
- You can view the full analysis from the report here: POM Ratings Report