Trade of the Day: Recovery in EXC Stock Could Land Traders 30%

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Exelon Corporation (EXC) — This utility services holding company and leading U.S. energy provider looks like a good buy for traders and investors seeking a lower-risk investment with a relatively high dividend yield ($1.24 per share for an annual yield of 4.5%).

Regulators are currently considering Exelon’s proposed acquisition of Pepco Holdings, Inc. (POM), which, if approved, would create the largest electric utility holding company in the United States with 8.5 million customers. Analysts at S&P Capital IQ Equity Research believe the merger could close by the end of the first quarter.

They estimate earnings of $2.57 per share in 2015, followed by a decline to $2.44 in 2016 due to lower power prices and expenses related to the Pepco acquisition. But they expect the acquisition to add 15 cents per share to earnings by 2017.

Capital IQ has a “strong buy” rating on EXC stock with a 12-month price target of $35.

Shares fell from a high just under $39 in December 2014 to a low near $25 in December 2015, where a buy signal from my proprietary internal indicator, the Collins-Bollinger Reversal (CBR), was flashed. Following this and a strong MACD buy signal, we got a high-volume advance to $28 that formed a “V” bottom.

Buy EXC stock under $27 with a six-month trading target of $35, which would result in a gain of almost 30%.

Exelon is also a holding of the Utilities Select Sector SPDR ETF (XLU), which Morningstar ranks a “four-star” ETF. XLU has a low expense ratio of 0.14% and an annualized dividend yield of 3.7%.

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Article printed from InvestorPlace Media, https://investorplace.com/2016/01/exelon-corporation-exc-stock-trade-of-the-day-2/.

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