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On Tuesday, Evercore ISI analyst Durgesh Chopra upgraded Exelon Corporation (NASDAQ:EXC) stock from an 'In Line' rating to 'Outperform.' Accompanying the upgrade, the price target was also increased to $44.00 from $43.00. Chopra highlighted Exelon's underperformance in 2024, noting a gain of 9% compared to the 17% average of the regulated coverage universe. This discrepancy has resulted in a 12% price-to-earnings (P/E) discount to the firm's 2027 earnings per share (EPS) estimate for Exelon. Currently trading at a P/E ratio of 16.23x with a market capitalization of $39.61 billion, InvestingPro data suggests the stock is slightly overvalued at current levels.
Chopra pointed out that while a discount is justifiable due to Exelon's average growth rate of 6% and its status as a pure transmission and distribution (T&D) utility, the current level of discount is considered excessive. The analyst emphasized that the multi-year Illinois rate decision made in December 2024 offers investment certainty through 2027, which is further bolstered by a light regulatory calendar expected for 2025.
The upgraded rating reflects a belief in an attractive risk/reward scenario for Exelon, with a base case total return of 16%. The analyst provided a bull/bear case valuation, suggesting a potential 21% upside and a 5% downside, with respective target prices of $46 and $36. To arrive at the $44 target price, Evercore ISI modeled a 6.5% EPS growth in their base case and applied an ~8% discount to their target 16x multiple.
As a catalyst for the stock, the upcoming fourth-quarter earnings release is notable. Scheduled for February 12, 2025, Exelon is expected to provide its 2025 EPS guidance range along with a detailed four-year capital and financing plan for 2025-2028. Evercore ISI's EPS estimate for 2025 aligns with the consensus at $2.62 and $2.63, respectively, and the firm anticipates that Exelon's guidance will be consistent with these estimates. With revenue growth of 9.03% in the last twelve months, investors can access detailed financial analysis and additional insights through the comprehensive Pro Research Report available on InvestingPro.
In other recent news, Exelon Corporation has been making strides in its financial performance and strategic growth initiatives. The company recently reported earnings that surpassed expectations, with a result of $0.71 per share compared to the consensus estimate of $0.67. This earnings beat was primarily due to a $0.04 gain related to distribution earnings at ComEd. Furthermore, Exelon's management maintained its earnings per share (EPS) guidance for 2024, projecting an EPS in the range of $2.40 to $2.50, aligning with BMO's and the consensus estimate of $2.45.
BMO Capital, despite reducing Exelon's price target to $46 from the previous $47, retained its Outperform rating on the stock. This decision suggests a positive outlook on Exelon's shares, despite the slight reduction in the price target. The revised target is based on a mark-to-market/sum-of-the-parts valuation approach.
In addition to its financial performance, Exelon has unveiled a $9.7 billion capital investment plan for electric transmission through 2027. This plan aims to enhance the energy grid's resilience and accommodate increasing demand due to electrification and climate change. A transmission project by Delmarva Power is projected to save customers nearly $100 million over two years. The company also plans to issue $1.6 billion of equity from 2024 to 2027 to support a $34.5 billion capital plan. These recent developments underscore Exelon's commitment to modernizing the energy grid and enhancing system resilience.
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