Did Exelon meet expectations for Q1 2024, and why did earnings decline year over year?

Exelon reported Adjusted Operating EPS of $0.68 versus $0.70 in Q1 2023, and GAAP EPS of $0.66 versus $0.67. The decline reflected lower allowed electric distribution ROE and the absence of a return on pension asset at ComEd, higher storm costs at PECO and BGE, lower CMC regulatory asset carrying-cost recovery, and higher holding company interest expense. These were partially offset by distribution rate increases at BGE and PHI. Mild weather also contributed to the shortfall.

Is Exelon's 2024 earnings guidance still intact?

Yes. Management affirmed 2024 Adjusted Operating EPS guidance of $2.40-$2.50 per share, based on about 1,003 million expected average shares. It also reaffirmed its 5-7% fully regulated operating EPS CAGR target through 2027, with an expectation to land at the midpoint or better.

What is the biggest regulatory risk to Exelon's growth outlook?

The largest uncertainty is in Illinois at ComEd. The ICC's April 2024 rehearing order provides interim revenue increases, but the final decision on the refiled Grid Plan and multi-year rate plan is not expected until December 2024. ComEd is also appealing the 8.905% ROE, the 50% equity ratio, and the denial of a return on its pension asset. Management notes the outcome could significantly adjust its earnings path, and the company cannot predict whether the ICC will approve the application as filed.

What rate relief is pending across Exelon's utilities?

Pending requests include PECO's electric (+$464M, partly offset by a one-time $64M credit in 2025) and gas (+$111M) cases, with decisions expected in late 2024. Pepco's DC and Maryland multi-year plans are expected to conclude in 2024, with a Maryland order expected by June 2024. ComEd's $627M 2023 formula rate reconciliation filing is also pending, with a decision expected in December 2024 for rates effective January 1, 2025.

How is Exelon funding its capital program, and does it need to issue equity?

Exelon plans about $34.5 billion of capital expenditures over 2024-2027 and $1.6 billion of total equity, with about $150 million to be issued in 2024 and the rest issued ratably over 2025-2027 (about $475 million per year). It has executed over 55% of its 2024 debt needs, including all planned HoldCo financing, and it maintains an at-the-market (ATM) equity program. Management is targeting a balance sheet that supports investment-grade credit ratings, with credit metrics kept above downgrade thresholds.

EXC 8-K: Earnings & Results & Regulation FD

01—Abstract

Summary

Summary of the 8-K filed May 2, 2024. Cited figures are marked; the original filing is the authoritative source.

Exelon (EXC) reported first quarter 2024 results on May 2, 2024, with GAAP net income of $0.66^a per diluted share ($658 million) and Adjusted (non-GAAP) Operating Earnings of $0.68 per share ($685 million), down from $0.67 and $0.70 per share, respectively, in Q1 2023.

The decline was driven primarily by lower allowed electric distribution ROE and the absence of a return on pension asset at ComEd, higher storm costs at PECO and BGE, lower carrying-cost recovery on ComEd's CMC regulatory asset, and higher Exelon holding company interest expense. Mild weather and a challenging storm season also weighed on results, partially offset by distribution rate increases at BGE and PHI. Management reaffirmed full-year 2024 Adjusted Operating EPS guidance of $2.40^b-$2.50, a 5-7% fully regulated operating EPS CAGR from 2023 to 2027, and a dividend payout ratio of about 60%.

The most important near-term driver for investors is regulatory progress in Illinois. ComEd received a rehearing order from the ICC on April 18, 2024, which increased its 2024 revenue requirement by $150 million^c, and rates take effect May 1, 2024, while the refiled Grid Plan and multi-year rate plan decision is expected by year-end 2024. The order is an interim step, so ComEd's long-term earnings path remains dependent on that final decision, and the company has flagged an appeal on the 8.905% ROE, 50% equity ratio, and pension asset treatment.

Elsewhere, PECO filed electric and gas rate cases seeking $464 million^d and $111 million in increases, respectively, and a settlement was approved for Delmarva Power in Delaware, with decisions for the PECO cases expected in late 2024. Financially, Exelon has a large capital plan of roughly $34.5 billion over 2024-2027, expected to drive about 7.5% rate base growth, and it executed over 55% of its 2024 debt financing in Q1, including all HoldCo needs.

Total assets rose to $103.2 billion and long-term debt to $42.3 billion, while operating cash flow improved to $992 million from $484 million. Investors should weigh the earnings softness and Illinois regulatory uncertainty against the reaffirmed guidance and a visible multi-year growth plan.

02—Key points

Key Highlights

Q1 2024 GAAP EPS of $0.66 and Adjusted Operating EPS of $0.68, versus $0.67 and $0.70 in Q1 2023; Adjusted Operating Earnings of $685 million (including a $27 million after-tax FERC audit liability charge excluded from adjusted results).
Full-year 2024 Adjusted Operating EPS guidance of $2.40-$2.50 affirmed, with a reaffirmed 5-7% fully regulated operating EPS CAGR from 2023 to 2027 and expectations at the midpoint or better.
ComEd's ICC rehearing order (April 18, 2024) raised its revenue requirement by $150M in 2024, $186M in 2025, $221M in 2026, and $253M in 2027, effective May 1, 2024, pending approval of the refiled Grid Plan (decision expected December 2024; the company is also appealing the 8.905% ROE and related items).
PECO filed electric (+$464M, 10.95% ROE) and gas (+$111M, 11.15% ROE) distribution rate cases on March 28, 2024, with decisions expected in late 2024; Delmarva Power's Delaware electric case was settled with a $27.8M increase at a 9.6% ROE.
Capital plan of about $34.5B over 2024-2027, supporting expected rate base growth of about 7.5%, with $1.6B of total equity planned (about $150M in 2024) and a dividend of $0.38 per share declared for Q2 2024.
Balance sheet and liquidity: $1.7B of senior notes issued at HoldCo in February 2024 to repay the SMBC term loan and commercial paper, and over 55% of 2024 debt financing executed in Q1; total long-term debt rose to $42.3B and operating cash flow increased to $992M from $484M.
Operational performance: top quartile reliability at all utilities, with ComEd and PHI achieving top decile SAIFI and SAIDI results, though mild weather and storm costs weighed on Q1 earnings.

03—Questions

Frequently Asked Questions

Did Exelon meet expectations for Q1 2024, and why did earnings decline year over year?
Exelon reported Adjusted Operating EPS of $0.68 versus $0.70 in Q1 2023, and GAAP EPS of $0.66 versus $0.67. The decline reflected lower allowed electric distribution ROE and the absence of a return on pension asset at ComEd, higher storm costs at PECO and BGE, lower CMC regulatory asset carrying-cost recovery, and higher holding company interest expense. These were partially offset by distribution rate increases at BGE and PHI. Mild weather also contributed to the shortfall.
Is Exelon's 2024 earnings guidance still intact?
Yes. Management affirmed 2024 Adjusted Operating EPS guidance of $2.40-$2.50 per share, based on about 1,003 million expected average shares. It also reaffirmed its 5-7% fully regulated operating EPS CAGR target through 2027, with an expectation to land at the midpoint or better.
What is the biggest regulatory risk to Exelon's growth outlook?
The largest uncertainty is in Illinois at ComEd. The ICC's April 2024 rehearing order provides interim revenue increases, but the final decision on the refiled Grid Plan and multi-year rate plan is not expected until December 2024. ComEd is also appealing the 8.905% ROE, the 50% equity ratio, and the denial of a return on its pension asset. Management notes the outcome could significantly adjust its earnings path, and the company cannot predict whether the ICC will approve the application as filed.
What rate relief is pending across Exelon's utilities?
Pending requests include PECO's electric (+$464M, partly offset by a one-time $64M credit in 2025) and gas (+$111M) cases, with decisions expected in late 2024. Pepco's DC and Maryland multi-year plans are expected to conclude in 2024, with a Maryland order expected by June 2024. ComEd's $627M 2023 formula rate reconciliation filing is also pending, with a decision expected in December 2024 for rates effective January 1, 2025.
How is Exelon funding its capital program, and does it need to issue equity?
Exelon plans about $34.5 billion of capital expenditures over 2024-2027 and $1.6 billion of total equity, with about $150 million to be issued in 2024 and the rest issued ratably over 2025-2027 (about $475 million per year). It has executed over 55% of its 2024 debt needs, including all planned HoldCo financing, and it maintains an at-the-market (ATM) equity program. Management is targeting a balance sheet that supports investment-grade credit ratings, with credit metrics kept above downgrade thresholds.

04—Continue

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