Exelon hit with two downgrades; Constellation a 'unique decarbonization play'
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Exelon (EXC
+2.2%) recoups a bit of its 20% loss that followed the completion of the separation of the Constellation Energy (CEG
+1.1%) power generation and competitive energy business.
"It's not as fun without [Constellation]," RBC's Shelby Tucker says in downgrading Exelon to Equal Weight from Overweight with a $46 price target, cut from $66, to reflect pre-separation, utility-only valuation based on a sum-of-the-parts analysis.
"We believe the outlook for Exelon is good and the regulatory pathway relatively clear, but ROE underperformance at ComEd will remain a drag until changes to rate-making become effective in 2024," Tucker writes.
Wells Fargo's Neil Kalton cuts Exelon to Equal Weight from Overweight with a $45 PT, chopped from $65, noting its EPS compound annual growth rate guidance is toward the high end of the group, and the wires heavy business mix is "unique and compelling," but the utility's jurisdictions are average to below average from a regulatory standpoint.
Kalton prefers the Constellation spinoff, initiating coverage with a Buy rating and a $65 PT, seeing the company as "uniquely positioned to capitalize on the long-term trend towards decarbonization" as the largest nuclear owner in the U.S.
Exelon announced its plan nearly a year ago to separate Exelon Utilities and Exelon Generation into two publicly traded companies.