Exelon Corporation (NYSE:EXC) — I normally don’t feature utility stocks as the Trade of the Day, but as we enter the historically weakest months of the year with stocks in aggressive industry groups unsettled, I believe it is time to take a more defensive posture.
I recommended Duke Energy Corp (NYSE:DUK) on Thursday, and today’s pick, Exelon, is the leading U.S. competitive energy provider with $27.4 billion in revenue last year. It is renowned for having one of the cleanest and lowest-cost power generation fleets in the country.
A company official told the U.S. Energy Association Thursday that the EPA’s proposal to reduce carbon emissions from existing power plants “can be achieved quickly and at low cost to consumers through a voluntary compliance program that uses existing market mechanisms to prioritize the use of emissions-free energy.”
On Wednesday, EXC stock rallied 1.1% after the company reported adjusted operating earnings for the first quarter jumped 15% year over year to $0.71 per share, beating Zacks consensus estimate of $0.68.
Following the report, Credit Suisse Group AG (ADR) (NYSE:CS), which has an “outperform” rating on EXC stock, noted the company’s better-than-expected load growth and improving margins.
Analysts at S&P Capital IQ forecast operating EPS will rise 4.2% this year to $2.49, and 4.8% next year to $2.61. They rate EXC stock a “buy” with a price target of $37.
On the chart, EXC stock appears poised to break from a downtrend that was established in January when it closed below a support line marking the bottom of a triangle at $37.
Shares are currently trading in a narrow bull channel with support at the 50-day moving average at $33.25. Resistance, and the breakout point, is just under the bearish resistance line at about $34 and the 200-day moving average at $34.41.
Buy EXC stock under $33.50, anticipating a break above resistance, with a 12-month target of $37. Including the 3.6% dividend yield, this could result in a total return of more than 14%.
