NEW YORK (TheStreet) -- Shares of Pepco (POM) were gaining 7.8% to $26.74 on heavy trading volume Friday after the Maryland Public Service Commission conditionally approved Exelon's (EXC) takeover of the electric utility company.
Shares of Exelon were gaining 2.9% to $34.51.
The acquisition was previously approved by regulators in New Jersey, Virginia, and the Federal Energy Regulatory Commission, according to the Wall Street Journal. The two companies still need to gain the approval of regulators in Washington, D.C. for the deal to go through.
"We are pleased that the Maryland Public Service Commission has approved our merger," Pepco and Exleon said in a statement. "However, the Commission's order modifies a number of the proposed conditions and we must carefully review it in its entirety."
The companies continued, "Our proposal delivers significant economic benefits to Maryland customers, increases reliability, promotes energy efficiency and advances clean energy as part of a long-term commitment to improve service and modernize our grid. We will have more to say once we have time to study the order."
About 7.2 million shares of Pepco were traded by 3:06 p.m. Friday, above the company's average trading volume of about 1.5 million shares a day.
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 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. Among the primary strengths of the company is its revenue growth. We feel its 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:
- POM's revenue growth has slightly outpaced the industry average of 2.8%. Since the same quarter one year prior, revenues slightly increased by 3.1%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- PEPCO HOLDINGS INC's earnings per share declined by 30.0% 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 increased its bottom line by earning $0.96 versus $0.41 in the prior year. This year, the market expects an improvement in earnings ($1.30 versus $0.96).
- The company, on the basis of change in net income 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 has significantly decreased by 29.3% when compared to the same quarter one year ago, falling from $75.00 million to $53.00 million.
- In its most recent trading session, POM has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Despite the stock's decline during the last year, it is still somewhat more expensive (in proportion to its earnings over the last year) than most other stocks in its industry. We feel, however, that other strengths this company displays offset this slight negative.
- The debt-to-equity ratio of 1.36 is relatively high when compared with the industry average, suggesting a need for better debt level management. To add to this, POM has a quick ratio of 0.53, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
- You can view the full analysis from the report here: POM Ratings Report