Exelon Stock Still Has Extraordinary Upside
2022.04.13 11:26
Utility services holding company Exelon (NASDAQ:EXC) stock has been on a tear hitting decade long highs. The Company owns energy generation facilities utilizing nuclear, hydroelectric, biomass, solar, and wind to accommodate its 10.5 million customers. Rising oil prices have lifted other energy providers The Company considers itself a leader in ESG and targeting a path to net-zero footprint. Exelon recently completed a tax-free spun off of Constellation Energy (NASDAQ:CEG), which is the nation’s largest generator of carbon-free power with its 13 nuclear power plants. While Exelon shareholders of record on Jan. 20, 2022, received 1 share of CEG for every 3 shares of EXC, both stocks are mirroring each other’s price action. Prudent investors seeking exposure in a clean energy utility play can watch for opportunistic pullbacks in shares of Exelon.
Constellation Energy Spin-Off
On Feb. 1, 2022, Exelon spun-off Constellation Energy after acquiring it a decade ago. Exelon shareholders received one share of CEG for every three shares of EXC owned. Constellation has nuclear capacity of 21 gigawatts among 13 power plants, making it the largest generator of carbon-free power in the U.S. It is also the best in class operator of nuclear plants leading the industry with a capacity utilization rate of 95% versus the $91% industry average. Operating costs have been falling since 2017 making its operating costs lower than the industry. The Constellation spin-off with start off with a reduction in debt and a strong balance sheet enabling a $0.55 annual dividend to shareholders from the get-go. Additionally, Constellation expects to grow the dividend by 10% annually. Free cash flow enables the Company to generate cash in excess of $2 billion of operations in excess of dividends, capex, and debt reduction. While Constellation is the second largest provider of retail electricity to consumer, it has a 23% market share of commercial and industrial customers making it the largest provider for that segment. This is a key niche since they tend to be more stable than residential customers. With the push towards zero-carbon among states, the opinion on nuclear power as a stable and clean energy source continues to improve and Constellation should be a main benefactor of the momentum. Shares of CEG have catapulted to new all-time highs above $64 since its spin-off.
Guidance
Exelon issued upside guidance for fiscal full-year 2021 for EPS of $2.82 versus $2.68 consensus analyst estimates. The Company reaffirmed guidance for fiscal full-year 2022 EPS of $2.18 to $2.32 versus $2.25 consensus analyst estimates.
Analyst Ratings
On Mar. 11, 2022, Mizuho analyst Paul Fremont upgraded shares to a Buy rating from Neutral with a $46 target. He forecasts Exelon’s EPS to growth rate to transcend its 7.3% average and projected a 13.4% 2024 FFO/debt ratio. The regulatory calendar for 2022 is light ahead of a major general rate case to be filed in 2023 for its Commonwealth Edison subsidiary. The $1 trillion infrastructure bill includes $5 billion for buildout of high-use corridors connecting the U.S. with electric charging stations which should be a tailwind for utilities. The National Electric Highway Coalition is composed of more than 50 utilities with the goal of providing charging stations along major highways by the end of 2023. Incidentally, RBC downgraded shares of Exelon due to the spinoff of Constellation Energy diluting performance.
Exelon Stock Chart
EXC Opportunistic Pullback Levels
Using the rifle charts on weekly and daily time frames provides a precision view of the landscape for EXC stock. The weekly rifle chart uptrend has a rising 5-period moving average (MA) support near the $46.38 Fibonacci (fib) level. The weekly 15-period MA is rising at $43.14 with weekly upper Bollinger Bands (BBs) at $50.20. The weekly market structure low (MSL) buy triggered on a breakout above $36.73. The daily rifle chart uptrend has a rising 5-period MA at $48.95 peaking at the $50.39 fib level. The daily upper BBs sit at $52.02 and daily 15-period MA is rising at the $46.79 fib level. The daily stochastic is coiling back up again above the 90-band. The daily MSL triggered above $42.68. The daily 50-period is rising at the $44.02 fib level. Prudent investors shouldn’t chase entries and instead watch for opportunistic pullbacks at the $46.79 fib, $45.55, $44.73, $42.85 fib, $41.83 fib, $40.11 fib, $38.90 fib, $37.69 fib, and the $36.76 fib/weekly MSL trigger. Upside trajectories range form the $57.03 fib up towards the $68.87 fib level.
