Exelon (EXC) – Strong Operating Margins Point to Future Growth

Exelon logged a -0.5% change during today's morning session, and is now trading at a price of $41.85 per share.

As of July 2023, the company's 50-day average price was $40.77. Exelon Corporation, a utility services holding company, engages in the energy distribution and transmission businesses in the United States and Canada. Based in Chicago, IL, the large-cap Utilities company has 19,063 full time employees. Exelon has returned a 3.3% dividend yield over the last 12 months, but this may not be sustainable seen that the company has a choppy cash flow record.

The Company's Revenues Are Declining:

2019-12-31 2020-12-31 2021-12-31 2022-12-31
Revenue (MM) $34,438 $33,039 $17,938 $19,078
Gross Margins 30.0% 28.8% 39.1% 42.1%
Operating Margins 12.6% 8.5% 15.0% 17.4%
Net Margins 8.53% 5.94% 9.51% 11.37%
Net Income (MM) $2,936 $1,963 $1,706 $2,170
Net Interest Expense (MM) -$1,616 -$1,635 -$1,289 -$1,447
Depreciation & Amort. (MM) -$5,780 -$6,527 -$6,434 -$3,533
Earnings Per Share $3.01 $2.01 $1.74 $2.26
EPS Growth n/a -33.22% -13.43% 29.89%
Diluted Shares (MM) 974 977 980 995
Free Cash Flow (MM) -$589 -$3,813 -$4,969 -$2,277
Capital Expenditures (MM) -$7,248 -$8,048 -$7,981 -$7,147
Net Current Assets (MM) -$78,367 -$81,887 -$84,261 -$63,269
Current Ratio 0.85 0.98 0.87 0.69
Long Term Debt (MM) $31,719 $35,483 $31,139 $35,662
Net Debt / EBITDA 3.35 3.68 3.58 5.29

Exelon suffers from declining revenues and a flat capital expenditure trend, slimmer gross margins than its peers, and declining EPS growth. The firm's financial statements also exhibit negative and highly variable cash flows and a highly leveraged balance sheet. On the other hand, the company has average operating margins with a positive growth rate working in its favor.

Exelon's Valuation Is in Line With Its Sector Averages:

Exelon has a trailing twelve month P/E ratio of 18.0, compared to an average of 22.89 for the Utilities sector. Based on its EPS guidance of $2.51, the company has a forward P/E ratio of 16.2. The -3.6% compound average growth rate of Exelon's historical and projected earnings per share yields a PEG ratio of -5.06. This indicates that its shares are overvalued.Furthermore, Exelon is likely overvalued compared to the book value of its equity, since its P/B ratio of 1.66 is higher than the sector average of 1.03. The company's shares are currently trading 17.2% above their Graham number.

Exelon Has an Average Rating of Buy:

The 14 analysts following Exelon have set target prices ranging from $39.0 to $48.0 per share, for an average of $45.39 with a buy rating. As of April 2023, the company is trading -10.2% away from its average target price, indicating that there is an analyst consensus of some upside potential.

Exelon has a very low short interest because 1.1% of the company's shares are sold short. Institutions own 84.9% of the company's shares, and the insider ownership rate stands at 0.2%, suggesting a small amount of insider investors. The largest shareholder is Wellington Management Group, LLP, whose 9% stake in the company is worth $3,924,728,638.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.