Exelon shares fall after UBS downgrade
NEW YORK (AP) — Shares of Exelon fell Wednesday after UBS downgraded the power company due to concerns over weakening prices.
THE SPARK: UBS lowered Exelon to "Sell" from "Neutral" and cut its price target for the shares to $31 from $37.
Analyst Julien Dumoulin-Smith said the change was due to the slide in some power prices since August and concern about tighter margins in the retail power business. The analyst also lowered earnings forecasts for this fiscal year and next.
THE ANALYSIS: Dumoulin-Smith said the company's goal of keeping retail margins around the upper end of a range between $2 and $4 per megawatt hour "could prove challenging given accelerating competition."
With recent drops in power prices, the analyst cut the 2012 earnings forecast to $2.77 per share from $2.85 per share; and for 2013 to $2.54 per share from $2.86 per share.
Analysts surveyed by FactSet expect Exelon to earn $2.76 per share this year and $2.65 per share next year.
Exelon sells wholesale electricity in states that have deregulated their power markets. Prices in those states are often dictated by the cost of burning natural gas, which has fallen in price because of strong production from new drilling techniques. The company has also been hurt recently by higher costs for nuclear fuel and maintenance. Exelon operates the largest number of nuclear plants in the U.S.
SHARE ACTION: In afternoon trading, shares of Exelon Corp. fell 79 cents, or 2.2 percent, to $34.70 after dropping to $34.54 earlier in the session. Other than a brief plunge below $30 in May 2010, that's the lowest price for the shares since 2004. The shares have been dropping since mid-2008, and in the past 52 weeks they have slid since hitting a high of $45.45 in November.