Monday, June 16, 2014

Exelon: Since When is a Utility a Momentum Stock?

When we think of momentum stocks, we usually think of high flyers like Facebook (FB) and Netflix (NFLX). But based on a simple definition–simply the best performing stocks in an index over a given period time–Exelon (EXC) has momentum at its back.

Exelon has gained 33% so far this year–easily besting Facebook’s 18% rise and Netflix’s 16% advance–making it the 19th best-performing stock in the S&P 500. And today it’s getting a further boost from Credit Suisse analyst Dan Eggers and team, who add Exelon’s shares to its Focus list today. They explain why:

We continue to view Exelon as offering advantaged leverage to the ongoing power market recovery while also retaining a series of levers (mostly unique to Exelon…) to drive additional upside including better regulated utility performance, success in O&M cost controls, retail margin expansion, as well as some form of value from carbon policy either at the Illinois state level or nationally (as set in motion by the EPA’s proposed rules on existing source emissions).

Exelon shares have been no doubt strong year-to-date, but we think the improvement in underlying business fundamentals is far from reflected in the share price, particularly after the pullback around equity to fund Pepco (POM).

Shares of Exelon have risen 1.9% to $36.39 at 10:33 a.m. today, while Pepco has gained 1% to $27.63. Netflix has ticked up 0.2% to $428.58 and Facebook has dropped 0.4% to $64.27.

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