This utility’s atomic reactors are providing an earnings boost and should give the company an edge for the long term. By Katy Marquardt, Staff Writer February 23, 2007 The growing momentum to curb global warming by regulating carbon dioxide emissions bodes well for Exelon, a Chicago-based utility. That’s because the company -- which sells electricity and gas to 5.2 million customers in Illinois and Pennsylvania -- is also the nation’s largest operator of nuclear power plants. Compared with coal-fired plants, atomic plants are cleaner and are cheaper to operate, making nuclear-powered energy an attractive investment (for more on our take, see Nuclear Ambitions, from the February 2007 issue of Kiplinger’s Personal Finance). Exelon’s fleet of 17 atomic reactors gives it an advantage over the droves of utilities that operate coal-fired plants. “We are increasingly convinced that investors will value Exelon's longer term leverage to the implementation of carbon emissions caps in the United States,” Citigroup analyst Greg Gordo wrote in a note to clients on February 23. Gordon upgraded Exelon’s stock (symbol EXC) from “hold” to “buy,” and increased his price target for the stock from $63 to $73. After the upgrade, Exelon’s stock jumped 4%, closing at $66.93 on February 23. Exelon’s shares have been un-utility-like over the past year. They fell to $50 in April 2006, climbed to $62 in October, and dropped to $58 in November. In 2006, the company faced regulatory battles in Missouri and Illinois, and saw a merger with New Jersey’s Public Service Enterprise Group fall through. Exelon also reported less-than-expected profits in the fourth quarter. But for all of 2006, it earned $1.6 billion, or $2.35 per share, a 73% increase over 2005 profits of $923 million, or $1.36 a share. Revenue rose 2%, to $15.7 billion. In 2007, the company expects to earn between $4.10 and $4.40 per share. Aside from its nuclear advantage, Exelon has a strong balance sheet and is churning out plenty of cash. The company has boosted its dividend at an annual rate of 14% over the past five years, to the current yearly rate of $1.76 per share. The stocks yields 2.6% and trades at 16 times the $4.31 per share that analysts estimate Exelon will earn in 2007. On February 6, Deutsche Bank Securities upgraded Exelon from “hold” to “buy,” also with a $73 price target. The analysts cited the company’s strong balance sheet, along with the expiration of a below-market contract in 2010 that should give the company an earnings lift. .