Exelon’s (EXC Quick QuoteEXC - Free Report) initiatives to provide safe and affordable clean power are expected to boost its performance. The company’s modernization of infrastructure and cost-saving initiatives will further improve margins.

However, this Zacks Rank #3 (Hold) stock faces risks related to the failure of transmission lines and adherence to stringent regulations.

Tailwinds

Exelon is focused on organic growth. During 2023-2026, it plans to invest nearly $31.3 billion in regulated utility operations for grid modernization and to increase the resilience of its infrastructure. These investments will support rate-based growth of nearly 8% through 2026.

The separation of the power generation and competitive energy business, namely Constellation Energy Corp., into a separate entity will allow Exelon’s management to concentrate on the transmission and distribution of clean energy. Nearly 73% of Exelon’s distribution revenues are decoupled, which insulates the top line from the impact of load fluctuations and leads to stable earnings.

Exelon’s stable cash flow allows management to continue distributing regular dividends. The board of directors announced a quarterly dividend raise of 6.7%. The annual dividend reflects a  yield of 3.59%, which is better than the industry average of 3.37%.

Headwinds

Exelon’s delivery business is highly regulated and could be subject to regulatory and legislative actions that adversely affect its operations or financial results. In addition, failure of the equipment or facilities, rising interest rates and fluctuating weather conditions hurt the company’s operating and financial results.

Stocks to Consider

Some better-ranked utilities in the same industry are OGE Energy (OGE Quick QuoteOGE - Free Report) , Consolidated Edison (ED Quick QuoteED - Free Report) and NiSource (NI Quick QuoteNI - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

OGE Energy’s long-term (three to five-year) earnings growth rate is pegged at 17.9%. It delivered an average earnings surprise of 19.9% in the last four quarters.

Consolidated Edison’s long-term earnings growth rate stands at 2%. It delivered an average earnings surprise of 9.5% in the last four quarters.

NiSource’s long-term earnings growth rate is pegged at 6.9%. It delivered an average earnings surprise of 0.5% in the last four quarters.