NEW YORK (TheStreet) -- Pepco Holdings (POM) stock is advancing 0.77% to $22.82 on Wednesday after analysts at KeyBanc Capital Markets this morning raised their rating on the company to "overweight" from "sector weight" and set a $25.50 price target.

The firm cited that the $6.8 billion merger deal with U.S. nuclear operator Exelon (EXC) is likely to close. 

Specifically, the ratings change is based on the 75% to 80% likelihood that the deal will occur, analysts noted.

However, challenges include the unexpected rejection of the deal by regulators, according to the analyst note. 

Based in Washington, D.C., Pepco Holdings engages in the transmission, distribution, and supply of electricity. 

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 and good cash flow from operations. 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:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 2.1%. Since the same quarter one year prior, revenues slightly increased by 2.0%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
  • Net operating cash flow has increased to $182.00 million or 34.81% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 23.67%.
  • PEPCO HOLDINGS INC reported flat earnings per share in the most recent quarter. 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 net income growth from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Electric Utilities industry average. The net income has remained constant at $53.00 million when compared to the same quarter one year ago.
  • POM has underperformed the S&P 500 Index, declining 16.31% from its price level of one year ago. Despite the decline in its share price over the last year, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry. We feel, however, that other strengths this company displays compensate for this.
  • You can view the full analysis from the report here: POM Ratings Report