Exelon: Poised To Pump Out The Juice

Getting Switched On
After bolting from 40 in November to 50 in April, shares of electric utility Exelon (EXC ) dimmed -- to 45 -- by mid-May. The recent fall in oil stocks pulled down utilities. But fans of Exelon, formed by the merger of PECO Energy of Pennsylvania and Unicom of Illinois, see a chance to buy.

Exelon sells electricity to 5.2 million customers and gas to 460,000. It is also a major producer of nuclear energy. Stephen Leeb of Leeb Capital Management is buying. "No other utility is better positioned to gain from coming shortages in fossil fuels and generating capacity," he says. And its strength will be boosted by a pending merger with Public Service Enterprise Group (PEG ) -- No. 1 in New Jersey, says Leeb. He sees the stock gushing to 60 in a year. Exelon, with 18% of the industry's nuclear capacity, will add 3 gigawatts of nuclear power from the merger, figures Leeb -- to a 20% share.

Exelon is a buy, says Paul Fremont of Jefferies Group (JEF ), at 13.1 times his 2007 postmerger earnings estimate of $3.50 a share. His 2005 forecast is $3.05, and for 2006 $3.25.

Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

By Gene G. Marcial

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