Exelon Fourth-Quarter Profit Misses Estimates on Costs, Weather
Exelon Corp. (EXC), the largest U.S. utility holding company, reported fourth-quarter profit that missed analysts’ estimates because of increasing power plant operating costs and warmer-than-normal weather.
Net income rose to $606 million, or 91 cents a share, from $524 million, or 79 cents, a year earlier, Chicago-based Exelon said in a statement on Business Wire today. Excluding costs from its pending purchase of Constellation Energy Group Inc. (CEG) and gains from financial contracts and investments, per-share profit was 6 cents less than the average of 14 analysts’ estimates compiled by Bloomberg.
Exelon is seeing profit margin shrink on electricity generated by its 17 nuclear reactors as contracts it signed when power prices were high begin to expire, said Andrew Levi, a New York-based power analyst with Caris & Co. A glut of U.S. gas supplies has cut prices for the power-plant fuel, in turn causing average electricity prices in PJM to fall 38 percent since 2008.
“Power prices in general have fallen off a cliff,” Levi said in a telephone interview before the earnings were released. “Whether it’s Exelon or some of the integrated names, they definitely have some big headwinds to fight.”
Levi doesn’t own or rate Exelon shares. The company said 93 percent of its power production in 2010 came from nuclear reactors, with gas fueling about 1 percent of its output. Its $7.36 billion plan to buy Constellation, announced April 28, is still awaiting regulatory approvals.
The announcement was made before regular trading began on U.S. markets. Exelon fell 1.5 percent to $39.22 yesterday in New York. The shares, which gained 4.2 percent last year, have 10 buy and 11 hold recommendations from analysts.
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