01—Abstract
Summary
Summary of the 8-K filed August 1, 2024. Cited figures are marked; the original filing is the authoritative source.
Exelon (EXC) reported second-quarter 2024 results on August 1, 2024, with GAAP net income of $0.45a per diluted share ($448 million), up from $0.34 a year earlier, and Adjusted (non-GAAP) operating earnings of $0.47 per share ($472 million), up from $0.41.
The $0.06b improvement was driven mainly by distribution and transmission rate increases at PHI, distribution rate increases at BGE, favorable weather at PECO, favorable Pepco multi-year plan reconciliations, and higher transmission peak load at ComEd. These gains were partly offset by higher interest expense at PECO, BGE and the holding company, and higher depreciation and amortization at PECO, BGE and PHI. Total operating revenues rose about 11% to $5.36 billion, and six-month GAAP net income rose to $1.106 billion from $1.012 billion.
Management reaffirmed full-year 2024 Adjusted operating EPS guidance of $2.40 to $2.50c, targeting the midpoint or better, and a 5% to 7% fully regulated operating EPS compound annual growth target through 2027. The company is investing about $34.5 billion in capital expenditures over 2024 to 2027, which it expects to grow rate base about 7.5%. Roughly 90% of expected 2024 debt financing was complete by quarter-end, and the company plans to issue about $150 million of equity in 2024.
Reliability remained top quartile at all utilities, and a Pepco Maryland multi-year plan order was received in June. The main investor watch items are regulatory. ComEd's Multi-Year Integrated Grid Plan remains unresolved, with a final order expected by December 2024 and a rate plan requesting a $682 milliond four-year revenue increase.
ComEd also has an appeal pending on its 8.905% ROE and 50% equity ratio. PECO has electric and gas rate cases requesting $399.3 million and $111.2 million, with orders expected in late 2024.
The Pepco Maryland order approved only a one-year increase of $44.6 million at a 9.5% ROE. Balance sheet metrics are being managed near downgrade thresholds, with S&P FFO/debt at about 12% against a downgrade threshold of roughly 12%.
02—Key points
Key Highlights
- Q2 2024 GAAP EPS of $0.45 vs. $0.34 in Q2 2023; Adjusted operating EPS of $0.47 vs. $0.41, a $0.06 (about 15%) increase.
- Full-year 2024 Adjusted operating EPS guidance of $2.40 to $2.50 reaffirmed, with management targeting the midpoint or better.
- Fully regulated operating EPS CAGR target of 5% to 7% through 2027 reaffirmed, supported by about $34.5 billion of 2024 to 2027 capex and roughly 7.5% expected rate base growth.
- Consolidated operating revenues rose to $5.36 billion from $4.82 billion (about 11%), and Q2 GAAP net income rose to $448 million from $343 million.
- Key regulatory overhang: ComEd's revised Grid Plan and multi-year rate plan (requesting $682 million over four years) await an order expected by December 2024, and an ROE appeal is pending.
- PECO electric and gas base rate cases request $399.3 million and $111.2 million, respectively, with orders expected in late 2024 for rates effective January 1, 2025.
- Quarterly dividend of $0.38 per share declared, payable September 13, 2024; about 90% of 2024 planned debt financing completed by quarter-end.
03—Questions
Frequently Asked Questions
Did Exelon beat or miss expectations for Q2 2024?
The filing does not include consensus estimates, so a beat or miss cannot be determined from it. On its own terms, the quarter was strong: Adjusted operating EPS of $0.47 was $0.06 above the prior-year quarter, and the company reaffirmed full-year guidance.
What drove the earnings improvement?
The main drivers were distribution and transmission rate increases at PHI, distribution rate increases at BGE, favorable weather at PECO, favorable Pepco multi-year plan reconciliations, and higher transmission peak load at ComEd. Higher interest expense at PECO, BGE and the holding company, and higher depreciation at the utilities, partly offset these gains.
What are the biggest regulatory risks to the outlook?
ComEd's Grid Plan and multi-year rate plan are unresolved, and the company is appealing parts of the ICC's December 2023 order, including the 8.905% ROE, 50% equity ratio and lack of a return on the pension asset. Pepco Maryland's order was only a one-year increase of $44.6 million, and PECO's rate cases are still pending. Management has said the outlook has flexibility for regulatory uncertainty in Illinois.
Is Exelon planning to issue equity or new debt?
Exelon plans about $1.6 billion of total equity to support its capital plan, with about $150 million issued in 2024 and the rest issued ratably from 2025 to 2027 (about $475 million per year). About 90% of expected 2024 debt financing was completed by June 30, 2024, and the company has an at-the-market program in place. Financing plans are subject to change.
Is the dividend safe and how does the balance sheet look?
The board declared a $0.38 quarterly dividend, and management expects a payout ratio of about 60%, with dividend growth in line with the 5% to 7% EPS CAGR target. Management says it is prioritizing a strong balance sheet, with credit metrics kept above downgrade thresholds. The cushion is thin, however: S&P FFO/debt is projected at roughly 13% to 14% for 2024 to 2027 against a downgrade threshold near 12%.
04—Continue