2022 01-03 l-mw_b_exc-report

1 of 18 | © BEHARRY, LYNDON MARTIN W. | 2022-01-03_LMwB_EXC-Report | 1/3/2022 10:32 AM
Exelon Corporation
Powering a Cleaner and Brighter Future for Our
Customers and Communities
America’s leading energy provider: Exelon Corporation powers over 10 million
customers throughout the country. The holding company’s portfolio of assets
include: Atlantic City Electric Company (ACE), Baltimore Gas & Electric (BGE),
Commonwealth Edison (ComEd), Delmarva Power and Light (DPL), Peco
Energy Company (PECO), and Potomac Electric Power Company (Pepco). The
entity touches every phase of energy production and delivery with some
measure of coverage in 48 states (i.e. the lower forty-eight).
One would not expect seasoned utility companies to post exorbitant stock
market returns, nor to exhibit extreme volatility. As expected, Exelon has
shown respectable revenue growth outpacing inflation with stock price
appreciation of 150% since the 2000s, with a recent expected βeta of 0.48.
The financial metrics also show consistent dividend payout policy with $0.125
per quarter in the early oughties rising to $0.383 per quarter in 2021.
In February 2021, Exelon’s shareholders and Board of Directors announced the
spin-off of Exelon Generation (SpinCo: power generation division) from Exelon
Utilities (RemainCo).1
As Exelon will no longer exist as a unified generation
through delivery utility, this instant evaluation is less a viable market pricing
analysis than a scholarly exercise for Exelon in its present pre-spinoff form.
KEY FINANCIALS
1,000,000 $USD (Except Per Share Values) 2018 2019 2020
Net Sales 35,978 34,438 33,039
% Change 7.19% -4.28% -4.06%
Net profit 2,046 2,737 1,757
% Change -48.11% 33.77% -35.81%
Depreciation / Amortization 4,353 4,252 5,014
EBIT Margin 3,779 5,601 3,968
EBIT Margin % Revenue 10.50% 16.26% 12.01%
EBITDA Margin 8,132 9,853 8,982
EBITDA Margin % Revenue 22.60% 28.61% 27.19%
Interest Expense 1,554 1,616 1,635
Interest % Revenue 4.32% 4.69% 4.95%
Times Interest Earned (EBIT:Interest) 2.43 3.47 2.43
Shares Outstanding 968 973 976
EPS 2.11 2.81 1.80
Avg Share Price (Undiluted Common) 30.64 38.58 39.63
Avg Share Price (Dilution Adj) 30.64 38.58 39.63
P/E 14.50 13.72 22.02
Book Value Per Share (Dilution Adj) 27.27 28.67 28.88
P/BV (Diluted) 1.12 1.35 1.37
RoE 6.19% 7.92% 5.04%
RoA 1.71% 2.19% 1.36%
Market Capitalization 29,659 37,542 38,682
Total Debt 86,596 90,404 94,449
Cash and Equivalents 8,016 7,441 5,936
Enterprise Value 108,239 120,505 127,195
EV/Sales 3.01 3.50 3.85
EV/EBITDA 13.31 12.23 14.16
Current Ratio 1.17 0.85 0.98
Acid Test Ratio 0.19 0.09 0.10
Debt:Debt+Equity 0.72 0.72 0.73
1
CHICAGO — Exelon Corp. (Nasdaq: EXC) today announced its Board of Directors has approved
a plan to separate Exelon Utilities (RemainCo), comprised of the company’s six regulated electric
and gas utilities, and Exelon Generation (SpinCo), its competitive power generation and
customer-facing energy businesses into two publicly traded companies with the resources
necessary to best serve customers and sustain long-term investment and operating excellence.
The separation gives each company the financial and strategic independence to focus on its
specific customer needs, while executing its core business strategy.
Quick Take
Buy / Hold December 20, 2021
Current Market Price 53.52
Target Price ???
Growth Expectation >15.00% + Dividends
Investment Period Long-term
STOCK INFO December 20, 2021
Sector Utility
Market Cap2
52.72 Billion
Net Debt (12/2021) 34.87 Billion
Beta3
0.48
52 Wk High/Low 54.98 / 38.35
Avg Daily Volume 5.22 Million
Book Value (per share) 34.60
Ticker NASDAQ: EXC
IRS EIN 23-2990190
INSTITUTION INVESTORS: @ 09/29/2021
Vanguard ≈ 8.45 %
Black Rock Inc. ≈ 8.24 %
Capital Intl Investors ≈ 6.10 %
State Street Corporation ≈ 6.06 %
OTHERS IN THE MARKET:
Free Float ≈ 976.23 Million | 99.82%
NASDAQ Trend 2019 2020 2021
CAGR (2000-Year) 3.594% 5.316% 6.10%
Y-o-Y Growth 35.23% 43.64% 17.70%
Max-Yr Chart
(https://www.exeloncorp.com/newsroom/exelon-to-
separate-its-utility-and-competitive-energy-businesses-into-
two-industry-leading-companies)
2
The analyst adjusted capitalization to account for Treasury
Stock.
3
Yahoo! Finance Statistics at 2021-12-19.
D
r
a
f
t
A
n
a
l
y
s
i
s

2022-01-03_LMwB_EXC-Report | Page 2 of 18
2 of 18 |© BEHARRY, LYNDON MARTIN W. | 2022-01-03_LMwB_EXC-Report | 1/3/2022 10:32 AM
OVERVIEW OF THE BUSINESS: EXELON CORPORATION
PECO Energy Company (PA) and the Unicom Corporation (IL) merged in
October 2000 to form Exelon Corporation in Chicago under Unicom CEO
John Rowe. With a growth mindset, Rowe sought to merge with Public
Service Enterprise Group Inc. (NJ). And while FERC approved this deal in
2005, public interest groups pressured NJ Board of Public Utilities to halt
merger talks and Exelon subsequently left the table. In Spring 2011, Exelon
combined with Constellation Energy in a $7.9 Billion deal, giving the new
company control over 34 gigawatts of power generation (55 percent
nuclear, 24 percent natural gas, 8 percent renewable including hydro, 7
percent oil and 6 percent coal). Following Rowe's retirement, Christopher
Crane was appointed CEO in 2008. By 2014, Exelon announced its proposal
to purchase Pepco Holdings, Inc. in an all-cash $6.8 Billion deal. After the
deal was rejected by the DC Public Service Commission in 2015, pressure
by other state and federal regulators pushed Exelon and Pepco to revise
terms to complete the merger in 2016. This made Exelon the largest U.S.
regulated utility by customer count and total revenue. Finally, in winter
2021, the entity decided to detach its utility and competitive energy
businesses into two separate publicly traded enterprises by Q2 2022.
ASSESSMENT OF REVENUE GROWTH (C. 2011-2020)
Exelon, America’s leviathan utility holding company has produced average
Sales growth outpacing inflation: 6.57% from 2011 through 2020. From
FY2011 through FY2020, EXC achieved a Compound Annual Growth Rate
(CAGR) of revenue of 6.653% - even accounting for declines attributed to
COVID and fossil fuel price volatility (deep declines in early-mid 2020). Fuel
cost volatility impacts utility revenue as power cost to consumer is tied to
fuel supply cost in the short-intermediate term.
THREATS AND CHALLENGES
Competition
Because utility suppliers are laden with expensive infrastructure, they are
relatively insulated from outright competition in the short-intermediate
term. Public policy restricts entry while maintaining close relationships and
tight regulations on the instant power suppliers.
Long-Term Debt
Exelon Corporation carries $35.5 Billion of long-term debt at a weighted
average before tax cost of 4.5%; its debt ratio (Total Liabilities: Total
Capitalization) is 0.7303 at FY2020.4 While slightly higher than the industry
median of 0.66, the analyst believes this is of no concern. And EXC 2020
FCFFirm of $6.77 Billion (roughly 20.5% of revenue) is more than adequate
to cover interest, CAPEX, Preferred dividends and Common dividends.
Furthermore, finance mechanisms had long ago determined that large
infrastructure projects including utilities’ economic capital is best served
with long-term debt tied to the construction of the generating and
transmission capacity.
GHG and National / International Compliance5
Exelon supports comprehensive federal climate legislation, including a
cap-and-trade program for GHG emissions that addresses the urgent need
to substantially reduce national GHG emissions while providing
appropriate protections for consumers, businesses, and the economy. In
the absence of comprehensive federal legislation, Exelon supports EPA
moving forward with meaningful regulation of GHG emissions under the
4
Long Term Debt: Total Capitalization ≃ 0.64984
5
Copied Verbatim from EXC FY2020 10K.
Clean Air Act. The Registrants currently are
subject to, and may become subject to
additional, federal and/or state legislation
and/or regulations addressing GHG emissions.
Generation produces electricity predominantly
from low- and zero-carbon generating facilities
(such as nuclear, hydroelectric, natural gas,
wind, and solar PV) and neither owns nor
operates any coal-fueled generating assets.
Generation’s natural gas and biomass fired
generating plants produce GHG emissions,
most notably CO2. However, Generation’s
owned-asset emission intensity, or rate of
carbon dioxide equivalent (CO e) emitted per
unit of electricity generated, is among the
lowest in the industry. Other GHG emission
sources associated with the Utility Registrants
include natural gas (methane) leakage on the
natural gas systems, sulfur hexafluoride (SF6)
leakage from electric transmission and
distribution operations, refrigerant leakage
from chilling and cooling equipment, and fossil
fuel combustion in motor vehicles. In addition,
PECO, BGE, and DPL distribute natural gas and
Generation sells natural gas at retail; and
consumers’ use of such natural gas produces
GHG emissions. (FY2020 10K) On November 4,
2020, the United States formally withdrew
from the Paris Agreement, retracting its
commitment to reduce domestic GHG
emissions by 26%-28% by 2025 compared with
2005 levels. However, on January 20, 2021,
President Biden accepted the Paris Agreement,
which resulted in the United States’ formal re-
entry on February 19, 2021. The Biden
administration has announced its intent to
pursue ambitious GHG reductions in the
United States and internationally.
MEASURE UP, DIVERSITY, AND SOCIAL RESPONSIBILITY
DIVERSITY METRICS6
Measure up Rank 217
Provides Day Care Services -
Facilitates Employee Resource Groups Yes
Has a Policy on Board Diversity Yes
Has a Policy on Diversity and Opportunity Yes
% Of Employees with Disabilities -
% Of New Employees who are women -
% Of Employees who are women -
% Of Managers who are women 24%
Gender pay Gap % 24%
% Of Board Members who are Minorities -
% Of Employees who are minorities 8%
% Of Managers who are minorities 28%
Minorities salary gap % 23%
6
https://fortune.com/company/exelon/fortune500/
D
r
a
f
t
A
n
a
l
y
s
i
s

PESTLE: CHARACTERISTICS
Economic
 Payroll conduit for 32,000 employees
 Changes in consumer demand brought on by contagion could
adversely affect upstream and downstream service revenue
o COVID: extension of consumer billing periods / severe
reductions to demand contributed to over 4% per annum
declines in revenue 2019, 2020, and likely 2021
 Delayed collections of receivables could impact liquidity, credit
ratings, and access to capital
Environmental
 Risk management supervision/training is outsourced to Jensen
Hughes (2019 IAEA document: 51081703-IAEA);
 Long-term on-site nuclear rods storage is problematic
o Nuclear waste hazards require secure long-term
depository;
 Astute transition from fossil fuels – underscore safe nuclear and
increased capacity for atomic energy;
 Climate and weather variation may impact demand and supply;
 Operates within national framework for climate legislation (cap and
trade GHG); supports EPA Clean Air Act;
 Wind power turbines use rare earth metals, particularly neodymium
for super-magnets in the dynamo;
 Rare earth mining typically (with present-day low-cost/economical
extraction methods) causes high levels of pollution (China).
Legal
 SEC Federal litigation/settlement regarding lobbying activities in IL
o Appearance of quid pro quo;
 Changing national safety regulations and safeguards on nuclear but
also GHG could impact strategy and operations.
Political
 Local and State government regulation may impact utilities’ rates,
financial performance, and consumer base;
 Tax breaks may expire in the short term
o Tax Cuts and Jobs Act brought Federal corporate tax to
21% (set to expire after 2125);
 Nuclear plants are an especially critical national security asset with
unique safety protocols and safeguards subject to exhaustive
oversight and regulatory adjustments as needed;
 Access to Uranium for fuel rods;7
 U.S. does not currently use plutonium in nuclear power plants, but
nuclear plants produce Pu through enrichment
o Depending on political winds, lobbyists against nuclear
weapons may find EXC an attractive target.
Sociological
 Employs 32,000 workers with positive diversity initiatives;
 Supports employees’ involvement in community (arts, education,
volunteerism, etc.);
 Good / above average health and leave benefits (GlassDoor);
 Limited Retirement Investment options (GlassDoor);
 Conduit for $US 33 billion of product and services;
 Services ten million individual customers among the mid-Atlantic
states
o social concern over environmental impact GHG and
nuclear.
Technological
 Safety first: drones image tension lines and transmission damage to
better prepare crews (etc.);
 Cons: Emerging techs could impact the firm by stimulating
expensive capital upgrades;
7
Canada, Australia, Russia, Kazakhstan, and Uzbekistan represented the top five countries of
origin and together accounted for 84% of total U.S. uranium purchases in 2017.
(https://www.eia.gov/todayinenergy/detail.php?id=37192)
 Over 10,000 nuclear professionals work in the nuclear power
production;
 Constructing next generation nuclear power generation
o Upgrading and refueling its nuclear plants in IL: “With
this landmark legislation in place, we are moving quickly
to restaff and refuel all of our nuclear plants for 24/7
operation, producing carbon-free, baseload electricity
for more than 10 million homes and businesses,” said
Dave Rhoades, Exelon Generation’s Chief Nuclear
Officer. “These plants are not only important for the
clean energy they produce, but they are massive
economic engines for their local communities,
contributing more than $1.6 billion to Illinois’ GDP each
year.”8
PORTER ANALYSIS IN BRIEF
Internal Rivalry
 Minimal to no internal rivalry because…
o Size of the firm;
o Public policy counters ubiquitous transmission
lines…
New Entrants
 Strong Economic / Financial barriers to entry
o Little threat of new entrants;
o Public policy counters ubiquitous transmission
lines…
Supplier power
 Fuel suppliers: Uranium; Wind Turbines; Solar panels; Fossil
Fuels (gas, oil);
 Supply of neodymium and other rare earths could affect
Exelon’s Wind Turbine fleet and solar array configuration;
 Rare earth metals are necessary for green energy
technology…
o neodymium, dysprosium, indium, selenium,
tellurium, terbium and gallium are easily
extracted in only a handful of geographic zones…
 U.S. sources its majority supply from
China, which some perceive as a
national security threat.
Buyer / Consumer Power
 Consumers typically speak through community and state
regulatory agencies…
o Regulatory agencies often have strong voices.
Threat of Substitutes
 Home energy production: Self-Sufficiency (solar, wind, and
biodiesel) is not a viable alternative for most households
o Little to no threat of substitutes.
8
https://www.power-eng.com/nuclear/saved-by-the-bill-
exelon-now-planning-300m-in-capital-works-for-illinois-
nuclear-plants/
D
r
a
f
t
A
n
a
l
y
s
i
s

FINANCIAL MODEL: PROSPECTIVE VIEW
Variables
CRITERIA
CoGS: F(Rev) 77.080%
Depreciation/Amortization (CoGS): F(Rev) 10.771%
SGA (Only) : F(Rev) 0.000%
R&D: F(Rev) 0.000%
Depreciation/Amortization (SGA): F(Rev) 0.000%
Other Expense (Income)/Overhead: F(Rev) -2.081%
Interest Expense (Income): F(Rev) 1.250%
Tax Rate: F(EBT) 20.000%
Capital Expenditures: F(Rev) 10.000%
Working Capital: F(Rev) 4.095%
βeta 0.480
Shares Outstanding (Million) 978
Inflation Rate (Est.) 2.500%
RF (T-bill annual) Rate 0.250%
CAPM KE Calculation 6.802%
KB Result 4.513%
KB Result with Tax Shield 3.610%
WACC 4.730%
Market Historical Returns 13.900%
Revenue Growth Rate (Projected Estimate) 5.000%
Perpetuity Growth Rate (Inflation) 2.500%
The analyst created prospective models and sensitivity
analyses to objectively determine Exelon valuations from
Free CashFlow to Equity (FCFE). By rigorously analyzing
the firm’s historical efficient financial performance, the
analyst derived costs and expense components as
objective functions of Revenue F(Rev), or in the case of
Taxation, F(EBT).
This table recounts the summary of variables used in the
Discounted Cash Flow analysis to isolate: 1) valuation of
the Firm’s Free CashFlow to Equity; and 2) valuation per
common equity share.
Discussion
The analyst produced three distinct prospective models of
FCFE: 1) Static model varying WACC; 2) Static model varying
Revenue Growth Rate; and 3) Dynamic multi-iterative Monte
Carlo model oscillating all variables within a tolerance of 10%
coefficient of variability. These models suggest a range of
Equity valuation for Exelon. The results page discusses the
outcomes of these Equity valuation simulations.
Costs of Capital
KE
The U.S. S&P 500 has posted recent annual returns (2011-
2020) of 13.9%; with long-term (30-year) CAGR of 10.7%.
Valuing Exelon, this analyst favors an equity return of
6.802% following the Capital Asset Pricing Model.
E(ri) = rf + β[E(rm)-rf]
= 0.250% + 0.48 X (13.9%-0.25%)
= 0.250% + 6.552%
= 6.802%
KB Long-Term Debt 10K:2020
MatDate Coupon Value Annual
1/1/2050 4.045% 18,915 765
1/1/2050 5.025% 10,585 532
1/1/2050 4.375% 3,700 162
1/1/2020 2.600% 0 0
1/1/2022 3.150% 0 0
1/1/2053 5.045% 170 9
1/1/2022 3.500% 1,150 40
1/1/2024 3.950% 30 1
1/1/2024 0.935% 143 1
1/1/2017 7.720% 10 1
1/1/2021 5.550% 21 1
1/1/2023 2.000% 50 1
1/1/2037 4.145% 977 40
1/1/2027 3.085% 765 24
0.000% -77 0
0.000% -248 0
0.000% 721 0
0.000% -1,819 0
1/1/2033 6.350% 206 13
1/1/2028 6.315% 81 5
1/1/2033 5.750% 103 6
35,483 1,601
Weighted KB 4.513%
With Tax Shield (20%) 3.610%
Weighted Average Cost of Capital
𝑊𝑊𝑊𝑊𝑊𝑊𝑊𝑊 =
𝐾𝐾𝐵𝐵𝐵𝐵+𝐾𝐾𝐸𝐸𝐸𝐸
B+E
=
[3.610%X0.350159]+[6.802%X0.64984]
1.000
=
[0.0234592] + [0.0238178]
1.000
= 0.047277 = 4.7277%
D
r
a
f
t
A
n
a
l
y
s
i
s

STATIC MODEL: PROSPECTIVE VIEW
Results of the Variable Revenue Growth Rate
This display reflects per share valuations from a 2.50%
annual growth rate of revenue (per share $68.34) through
7.50% annual revenue growth ($159.87). The Prospective
free cash-flow to equity analysis returned an expected per
share valuation of $109.40 at a 5.00% growth rate, with
WACC of 4.73%.
Discussion
The analyst expects the firm would regress to its mean
revenue growth rate of 6.60% (intermediate term) with
some upside potential as the U.S. economy overcomes
COVID-induced economic retraction.
Results of the Variable WACC Growth Rate
This chart plots Exelon valuations at different rates of capital
costs. The expected value per share is $109.40 at the
calculated WACC: 4.73%. Higher WACC returns lower per
share valuations.
Discussion
The analyst expects Exelon’s weighted average cost of
capital to be no less than 4.73%, but it may be higher. Thus,
the Firm would produce true value only through increased
growth in revenue, and through cost reduction.
MONTE CARLO FINANCIAL MODEL: PROSPECTIVE VIEW
Overview
Monte Carlo quantitative analysis is a statistics-mathematics
process. It mimics real-world volatility to probabilistically predict a
range of outcomes. The analyst employed the identical variable
structure for both the static and Monte Carlo equity valuation
models. BUT, the Monte Carlo process dynamically alters the
factors within defined constraints. In this instance, Monte Carlo
uses the variables as the statistical mean (arithmetic average), and
fluctuated each factor 500,000 times at a standard deviation of
10% of the mean value.
Results
This chart illustrates a
potential range of
valuation for Exelon
common equity per share
at a paltry 5.00% growth
rate. Using this variable
structure, the model
delivers the following
statistics: a) an expected
median per share price of
$113.95; with a b)
projected maximum to
$623.21. At a base 5.00%
revenue growth rate, the
simulation returned a 70.88% probability of a fair valuation of over
$60 per share.
EXC: EXELON MONTE CARLO5.00%:
VALUATION PER SHARE
CURVE SHAPE Lognormal
TRIALS 500,000
MEAN 114.19
MEDIAN 113.93
MODE N/A
ST DEV 98.48
MINIMUM -374.45
MAXIMUM 627.24
VALUE >$50 74.25%
VALUE >$75 65.40%
VALUE >$100 55.65%
VALUE >$125 45.49%
D
r
a
f
t
A
n
a
l
y
s
i
s

Discussion
The analyst sculpts scenarios with cautious estimates, aiming to err
on the side of restraint. This Monte Carlo prospective model uses
conservative estimates for growth and cost/expense factors:
growth rate approximating recent U.S. or world historical inflation;
and costs following historical mean percentages, tempered against
industry norms.
But when Exelon emerges from COVID conditions, revenue growth
rates may well rise over 5.00% for a half-decade or more. Although
this potential is captured within the Monte Carlo model, the
conservative parameters pull valuation potentials back toward the
mean. And while this particular model only returns a 55.65%
probability of per share equity warranting values greater than
$100, the region of 10.00% growth is well within the realm of
possibility when the U.S. emerges from COVID constraints. The
static model sensitivity analysis predicts a per share value of over
$155.00 at 7.50% Revenue growth. And one must also consider
how an upgraded infrastructure regime supporting new atomic and
green energy production will buttress Exelon’s cash position and
increase shareholder value.
1) Cost of Sales dominates ultimate production of
Shareholder Value and Returns on Equity.
Businesses have recognized this truth since
humanity’s early ancestors debated whether to
hunt every day (including unhealthy hot days), or to
gather on some days and expense hunting assets
(experience, training, and energy) only within
profitable conditions.
2) In ART OF WAR, Sun Tsu ordered the army to gain its
sustenance off the enemy’s land. In other words,
neither the troops nor the generals should reap any
excessive rewards unless and until the Firm earns
command over Revenue in the target market. In the
case of Exelon, the firm should manage its back-
office payroll and executive bonus structures until
the firm secures success in mastering energy
production in the post-GHG eco-friendly
environment.
3) Certainly, Exelon must invest in capital
infrastructure and with foresight. The firm must
tightly control its investment in capital
infrastructure, and safely squeeze additional years
from equipment. In addition, the firm may wish to
create an internal R&D department. While R&D is a
cost center that bills expense to production; over
years, R&D may well engender significant
shareholder value in new production fleet assets.
<><><><>
Sensitivity Analysis
The Monte Carlo FCFE DISCOUNTED CASH FLOW PROJECTION is sensitive to particular conditions: 1) Because the perpetuity CashFlow dwarfs
estimated cash-flow in
any given annum, the
terminal year COST OF
GOODS SOLD typically
asserts dominance over
the Firm and its weighted
Equity valuation; 2) 2031
CAPEX; 3) 2031 TAX RATE;
4) 2031 DEPRECIATION AND
AMORTIZATION; 5) 2031
OTHER EXPENSE (INCOME)
and 6) 2030 REVENUE
The Tornado Chart
sensitivity analysis of
Exelon’s valuation with
these instant variables
imputes a heavy
weighting upon the
perpetuity model – likely
because the near-term
growth rate of 5% per
annum is relatively low. This analyst believes that Exelon will actually suffer a Y-o-Y loss of revenue in 2021 due to COVID’s effect on
the U.S. economy.
D
r
a
f
t
A
n
a
l
y
s
i
s

FRAUD ANALYSIS
Statistics Testing for Anomalous Financial Reporting
Benford’s Test
Beneish M-Score
METHODOLOGY OF FORENSIC ANALYSIS TO DETECT FRAUD
Twenty-first century forensic analysis of financial
records encourages mathematics and statistics to
test anomalies in financial reporting. The analyst
favors two forensic tests: Benford’s Test, and
Beneish’s M-Score. Note: Forensic Accounting
analysis cannot prove fraud; it simply suggests
instances of potential anomalies in reporting.
Benford’s (First Digits) Law
Benford’s law (First Digits Law) predicts that the
first digits in random sets of numbers which span
across several orders of magnitude (i.e. ones, tens,
hundreds, thousands, etc.) will conform to a set
distribution (the bronze columns). Because of
compounding over time intervals, the First Digits
rule affirms that there are more instances of
numbers beginning with 1, then 2, then 3, and so
on.
This analysis tested Exelon’s Balance Sheet
numbers against Benford’s Law. The first digits of
the Balance Sheet numbers fall very close to
expected outcomes; and the analyst believes this
indicates fair and honest reporting.
The Beneish M-Score calculations
Exelon’s Beneish scores are excellent for several
years running. They reflect no anomalous readings.
D
r
a
f
t
A
n
a
l
y
s
i
s

OUTLOOK AND RECOMMENDATION
This analyst is optimistic for Exelon’s growth and value
prospects going forward. Since its founding, the Firm’s
senior management has exhibited leadership and has
typically seized first mover advantage. Exelon’s
realignments to detach its generating division from its
transmission and utilities indicates continued
entrepreneurial focus seeking superior stakeholder value.
Success in transitioning to more carbon-neutral energy
production produces valuable public relations for the
company. Its long-standing core competency in atomic
energy generation also contributes to its national
leadership position. This nuclear competency may also
give the firm an edge in prospective international
endeavors if management is so inclined.
The firm should consider whether it is beneficial to
mitigate supply risks through vertical integration and/or
public private partnership to secure rare earth inputs for
wind and solar infrastructure. But such a move is
particularly challenging. On the one hand, if the Firm
partners with mining/extraction firms or public
institutions, it gains more control over its supply source.
On the other hand, such enterprise would expose Exelon
to risks associated with long-tail pollution and land
degradation. Such endeavors require extreme foresight
and substantial investment into capital infrastructure, and
new core competences for environmental control,
remediation, and monitoring.
This analyst posts a strong BUY recommendation for
the Company. Exelon is the long-standing leader in
America’s energy industry. It boasts decades of
experience in generating, transmission, and
maintenance of power infrastructure. Its core
competency in nuclear power generation is
particularly valuable as the world transitions away
from GHG power production. Furthermore, as the
U.S. economy emerges from COVID restrictions and
the associated economic malaise, the Firm will
achieve robust growth and accelerate its free-cash-
flow levels.
Will the stock run-up? Probably not – especially since
Exelon GENERATING will split from Exelon UTILITY
TRANSMISSION in Q2 2022. But present-day Exelon, and
likely both of the newly formed spun-off entities will
continue to generate excellent cash-flow and returns
for the investors in regular dividends after Q2 2022.
Enjoy your investments!
And remember…
It's not the size of the dog in the fight, it's the
size of the fight in the dog. …Mark Twain
D
r
a
f
t
A
n
a
l
y
s
i
s

FINANCIAL INDICES
D
r
a
f
t
A
n
a
l
y
s
i
s

D
r
a
f
t
A
n
a
l
y
s
i
s

FINANCIAL INDICES
D
r
a
f
t
A
n
a
l
y
s
i
s

D
r
a
f
t
A
n
a
l
y
s
i
s

2022 01-03 l-mw_b_exc-report

Recommended

Recommended

More Related Content

What's hot

What's hot (8)

Similar to 2022 01-03 l-mw_b_exc-report

Similar to 2022 01-03 l-mw_b_exc-report (20)

More from Lyndon Martin W. Beharry

More from Lyndon Martin W. Beharry (20)

Recently uploaded

Recently uploaded (20)

2022 01-03 l-mw_b_exc-report