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Exelon Corporation: Strong, Defensive, But Unexciting

Jun. 03, 2020 12:16 PM ETExelon Corporation (EXC)4 Comments


  • Though Exelon Corporation has a robust balance sheet, its profitability ratios are way lower than the profitability of other companies in its sector.
  • The company has been a steady but unexciting performer for investors that have been holding it for more than 3 years.
  • To buy or trade this stock, you need a well-defined strategy and a long-term vision.
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Almost every way we make electricity today, except for the emerging renewables and nuclear, puts out CO2. And so, what we're going to have to do at a global scale is create a new system. And so, we need energy miracles. - Bill Gates

At this time, I am neutral on Exelon Corporation (NASDAQ:EXC) despite its robust balance sheet. However, after this COVID-19 disruption blows over, long-term investors can consider buying the stock as a secular, defensive play. Based on its prospects, this is an unexciting stock that has to weather some uncertainty in 2020-21.


Image Source: Twitter

Demand for electricity had dipped in April and I had reported it in The Lead-Lag Report and tweeted about it as well. Demand is still in no man's land and though EXC has issued a muted guidance for 2021, it admits that it is very difficult to predict how the COVID-19 situation will unfold.

Here are the reasons why I have rated the company as neutral:

Price Performance


Image Source: Seeking Alpha

The performance of EXC and its peers, which include FirstEnergy Corp. (FE), American Electric Power (AEP), and Entergy Corporation (ETR), over the short and medium-term, has been disappointing. However, the peer group - except EXC - has delivered steady gains and dividends for folks who have been holding the stocks for more than 3 years.

EXC's price has fallen 16% year-to-date and its dividend yield has bumped up to 3.99% as of June 1, 2020. Folks who have been holding the stock for 1 year are in a loss - however, EXC does have the potential to deliver decent gains over the long term as a defensive play.

COVID-19 Impact on EXC's Business

In EXC's Q1 2020 earnings call, the management team informed analysts that the stay-at-home orders had adversely

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This article was written by

Michael A. Gayed, CFA profile picture
5x Dow & Founders Award Winner. Risk-On/Off $RORO, Junk-On/Off $JOJO, & $ATACX Portfolio Manager. Anticipate Crashes, Corrections, & Bear Markets With The Lead-Lag Report. Sign Up For 2 Weeks Free.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

This writing is for informational purposes only and Lead-Lag Publishing, LLC undertakes no obligation to update this article even if the opinions expressed change. It does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction. It also does not offer to provide advisory or other services in any jurisdiction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Lead-Lag Publishing, LLC expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (4)

This is just how ordinary this company is.
long term chart shows the market has no interest in the company.
Gary Gambino profile picture
Covid is more of a macro issue. I don't think it would impact Exelon more or less than any other utility. So it's fine to avoid EXC because you're worried about covid, but just know you are making a macro call.
The company-specific risks are more interesting. Most importantly, will Exelon find a way to sell into the PJM capacity market from its nuclear plants? The FERC has basically set minimum pricing rules that don't allow EXC to take advantage of nuclear generation subsidies offered by the various states. Many of Exelon's nuke plants would not be economic to run if they can't sell into this market.
Old Professor profile picture
"Strong, Defensive, But Unexciting." Right, just like an enduring, if low-key, marriage.
@Old Professor, a keen awareness of human nature.
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