NEW YORK (TheStreet) -- Shares of Pepco Holding (POM) shares closed trading up 2.5% to $25.41 on Monday after rival Exelon (EXC - Get Report) reached a tentative agreement with the mayor of Washington D.C. to merge with Pepco for $6.8 billion, according to Bloomberg.
D.C. Mayor Muriel Bowser reached a tentative agreement with Exelon that requires the company build a second headquarters in Washington, where Pepco is based.
The agreement is a reversal from the District of Columbia Public Service Commission's earlier decision to disallow a merger between Pepco and Chicago-based Exelon.
Exelon had already received regulatory approval from officials in Maryland, Delaware, New Jersey and Virginia, with the District being the last jurisdiction needed for the deal to go forward.
Exelon shares closed trading up 1.61% to $30.30.
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 multiple strengths, 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:
- POM's revenue growth has slightly outpaced the industry average of 0.8%. 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 22.08%.
- 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 ($1.20 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 9.00% 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