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Exelon Corporation (EXC - Analyst Report), a utility services holding company, is scheduled to report its third-quarter 2012 financial results on November 1, 2012.

Second-Quarter Recap   

Exelon announced second-quarter 2012 operating earnings of 61 cents per share, lower than the year-ago figure of $1.05 per share and the Zacks Consensus Estimate of 63 cents per share.

The year-over-year decline in quarterly earnings were attributable to an increase in the average diluted shares outstanding due to the merger with Constellation, lower energy margins at Generation, and higher operation and maintenance costs. These were partially offset by fewer nuclear outage days and the addition of Baltimore Gas and Electric’s and Constellation’s results.

The company’s total operating revenue for second-quarter 2012 was $6.4 billion, reflecting a year-over-year growth of 42%. Reported quarter revenue missed the Zacks Consensus Estimate of $6.9 billion.

Third-Quarter and Full-year 2012 Guidance

Exelon expects its third-quarter 2012 operating earnings guidance to be in the band of 65 cents - 75 cents per share. The company reaffirmed its full-year 2012 earnings guidance range of $2.55 to $2.85 per share.

Exelon expects to generate 219,600 Gigawatt Hour (“GWh”) of power assuming that its nuclear plants will achieve an average capacity factor of 93.1% in 2012.

The company expects cash from operations in full-year 2012 to be $5.37 billion and also forecasts the issue of new debts of $1.75 billion during 2012. Exelon hopes to retire $1.07 billion of debt during the year.

Zacks Consensus  

The Zacks Consensus Estimate for third-quarter 2012 earnings is 72 cents per share, lower than $1.12 per share reported in the prior-year quarter. Currently, the Zacks Consensus Estimate for the company’s earnings ranges between 69 cents and 77 cents per share.

For full-year 2012, the Zacks Consensus Estimate stands at $2.75 per share, lower than the prior-year earnings of $4.16 per share. The current Zacks Consensus Estimate for full-year 2012 ranges from $2.70 to $2.80 per share.

Estimate Revisions Trend

Agreement

For third-quarter 2012, we have observed that no estimates have moved either in the upward direction or in the downward direction in the last 7 days. Over the last 30 days, 1 estimate has moved upward whereas no estimate moved in the downward direction.

For full-year 2012, we have observed that none of the estimates have moved either in the upward direction or in the downward direction in the last 7 days. In the last 30 days, 5 estimates have moved upwards whereas 3 estimates followed a downward trend.

Magnitude

In the last 30 days, the Zacks Consensus Estimate for third-quarter 2012 earnings per share declined by a penny to 72 cents.  

The Zacks Consensus Estimate for full-year 2012 earnings remained unchanged at $2.75 per share in the last 7 days.

In the last 30 days, the Zacks Consensus Estimate for full-year 2012 earnings per share rose by a penny to $2.75 from its earlier projection of $2.74.

Surprise History

With respect to the earnings surprises, Exelon has topped the Zacks Consensus Estimate in two quarters out of the last four quarters. Over the last four quarters, the surprise ranges from -6.82% to 4.94% with an average of -0.58%.

Our Recommendation

We believe that completion of merger with Constellation has benefited Exelon’s future operating and financial results, including cost synergies, load and customer base.

In addition, Exelon continues with its investments to upgrade its infrastructures, which will subsequently enable the company to produce additional 420 million watts of carbon-free power in the next five years. In the long term, the additional production will benefit the company when Environmental Protection Agency regulations come into effect in late 2014. The smaller units, which fail to meet the environmental requirements, would be forced to shut down and thus make way for Exelon to increase its market share.

However, Exelon’s pending rate cases and volatile commodity prices continue to be challenges on the company’s forthcoming performance.

Exelon Corporation currently has short-term Zacks #3 Rank (Hold rating).

Chicago, Illinois-based Exelon Corporation engages in the generation, transmission, distribution and sale of electricity to residential, commercial, industrial and wholesale customers. With a market capitalization of $30.29 billion, Exelon has 19,267 full time employees. The company competes with Ameren Corporation (AEE - Analyst Report).

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