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We have maintained our Neutral recommendation on Exelon Corporation (EXC - Analyst Report). The company currently has a Zacks Rank #3 (Hold).

Why the Reiteration?

The reiteration was primarily based on risks associated with Exelon Corporation’s highly regulated operations and pending rate cases. However, we consider the company’s solid utility operations and strong financial position as catalysts, which can mitigate the challenges.

In the fourth quarter and full year of 2012, Exelon Corporation’s earnings per share and revenues missed the Zacks Consensus Estimates primarily due to higher operating expenses and depreciation and amortization costs, and lower demand due to sluggish economic recovery.

Exelon Corporation continues to focus on maintaining a strong financial position. The company’s cash balance was $1.4 billion as of Dec 31, 2012, and cash generated from operating activities were $6.1 billion in 2012. This financial condition enables the company to follow a steady inorganic as well as organic growth strategy.

It is nice to see that Exelon Corporation generates maximum energy from its nuclear plants and continues to construct plants with the utilization of renewable sources. These initiatives will consequently allow the company to produce additional 420 megawatt carbon-free power in the next five years. The additional output will benefit Exelon Corporation with the Environmental Protection Agency’s regulations coming into effect in late 2014.

In addition, we appreciate the company’s strategy to curb the quarterly dividend rate in order to retain cash and make investments in profitable ventures. We believe contributions from the acquired assets to the top line will increase in the future.

Other Stocks to Consider

Other stocks from the industry that are presently performing better include Brookfield Infrastructure Partners L.P. (BIP - Snapshot Report), Empresa Nacional de Electricidad S.A. (EOC - Snapshot Report) and Pike Electric Corporation (PIKE - Snapshot Report). All the three stocks carry a Zacks Rank #1 (Strong Buy).

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