Exelon Year in Review: the Good, the Bad, the Ugly
With 2013 fast approaching, now is the perfect time to examine how your portfolio picks played out in 2012. In this year-in-review assessment, we'll examine Exelon's announcements, stock movements, dividend, and fundamentals from 2012. Arm yourself with this top-level analysis, and you'll be well on your way to a truly happy new year.
Big moves
Exelon has been busy in 2012. It successfully maneuvered one of the largest utility mergers ever seen, survived a hurricane season, repaired, invested, divested, and felt the unforgiving fiscal cliff fears worse than most corporations. Here's a quick sample of some of Exelon's announcements:
Jan. 5: Exelon's Michigan Wind 2 Project goes operational, adding 90 MW to bring the company's total wind capacity to 212 MW.
Jan. 6: Subsidiary ComEd announces a 10-year, $2.6 billion investment plan to add digital smart grid and meter technology to its operations.
March 9: The Federal Energy Regulatory Commission approves the merger of Exelon and Constellation Energy, clearing the way to add 12,000 MW of capacity to Exelon's 35,000.
Aug. 28: Exelon cancels its plan to build a new nuclear plant in Texas, due in part to prohibitively low natural gas prices.
Oct. 4: ComEd delays grid modernization pending regulatory cost recovery denials.
Late Oct.-Nov. 7: Hurricane Sandy hits, subsidiary PECO utility completes more than 15,000 repair jobs to restore power to more than 850,000 customers.
Dec. 3: Exelon divests Maryland "clean coal" plants (2,648 MW installed capacity) in compliance with FERC's requirements for the Constellation merger.
Stock and dividend
Exelon's stock has had a rough 2012. At the same time as the S&P 500 pulled in 11% gains, the company's shares dropped 30%. For most of 2012, its stock has been steadily declining, with a November drop adding insult to injury. While last month's drop comes partly from fiscal cliff fears,Exelon's Q3 earnings also failed to impress Wall Street.
As its stock suffered, Exelon's divided yield steadily rose throughout 2012. Unfortunately, current cash flow has left the utility's dividend in dangerous waters for the next year. With a cash-to-dividend payout ratio of 123%, Exelon may be paying out an unsustainable dividend to shareholders. Management's currently realigning its finances, and 2013 will likely see a smaller yield.
EXC Dividend Yield data by YCharts
Utilities have historically been steady dividend stocks, but diversifying energy portfolios and potential fiscal-cliff-related dividend tax hikes have created new opportunity for a variety of business models. Exelon's dividend is currently near the top, but it's probably headed lower next year (ostensibly to the benefit of shareholders).
Company | Dividend Yield |
|---|---|
Atlantic Power | 10.1% |
Exelon | 7.1% |
FirstEnergy | 5.3% |
Duke Energy | 4.7% |
Southern Company | 4.5% |
Consolidated Edison | 4.3% |
Dominion Resources | 4.1% |
National Grid | 4% |
NextEra Energy | 3.4% |
Source: Yahoo! Finance
Fundamentals
While the company's sales climbed 25%, net income was halved in 2012. But these numbers are only the roughest of estimates, since Exelon's March merger with Constellation Energy put a cog in the wheel of most fundamental analysis.
EXC Revenue Quarterly YoY Growth data by YCharts
Margins, a steadier sign of management effectiveness, declined slightly since the start of the year. Gross margins remain above the 34% industry average, while net profit margins are subpar compared to utilities' average 8.1% margin. Exelon's merger will ideally lend itself to scale efficiencies, paving the way for larger margins next year.
EXC Gross Profit Margin Quarterly data by YCharts
Foolish bottom line
From a purely financial perspective, Exelon's had a tough 12 months; $1000 invested on Jan. 1 is $700 today, and fiscal cliff fears could continue to punish dividend stocks in the coming days. But as Exelon recovers from merger madness, diversifies its energy portfolio, and chooses to focus on long-term value creation over short-term dividend compensation, there could be a brighter 2013 in store for this utility.
For a full deep dive analysis on Exelon's offerings, you're invited to check out The Motley Fool's premium research report on the utility. It's chock-full of details and outlines the opportunities and risks awaiting Exelon in 2013. Simply click here now for instant access.
The article Exelon Year in Review: the Good, the Bad, the Ugly originally appeared on Fool.com.
Justin Loiseau has no positions in the stocks mentioned above, but he does use electricity. You can follow him on Twitter, @TMFJLo, and on Motley Fool CAPS, @TMFJLo.The Motley Fool has no positions in the stocks mentioned above. Motley Fool newsletter services recommend Dominion Resources, Exelon, National Grid, and Southern Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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