By Jim Brumm
Reuters
September 27, 2001, 10:53 AM CDT
NEW YORK -- Exelon Corp. (EXC.N), one of the largest U.S. utility operations, today cut its 2001 earnings target and said another 450 jobs would be eliminated due to economic and market weakness and volatile energy markets.
The company cited cooler weather for the volatility in energy prices and said a drop in telecommunications stocks had hurt its investments.
"While we instituted cost-containment efforts to address the economic weaknesses in the third quarter, the revenue impact of recent events cannot yet be quantified," Co-Chief Executive Corbin A. McNeill added.
Shares of Exelon, formed last October when Philadelphia Electric Co.'s parent company acquired Chicago's Commonwealth Edison, dropped about 23 percent to $38.99 a share in morning trading, the lowest since early April, 2000 when it was being traded as PECO.
The company said it now expects third-quarter earnings of $1.10 to $1.20 per share. It previously said earnings in the third quarter would be $1.35 to $1.80, based on 30 percent to 40 percent of its full-year earnings target of $4.50 per share.
Based on that outlook, analysts told Thomson Financial/First Call, they expected third-quarter earnings per share ranging from $1.51 to $1.62, resulting in a consensus earnings of $1.57, which the analysts compared to $1.41 one year ago.
Exelon said pro forma earnings in 2000's third quarter, assuming the company was formed on January 1, 2000, were $1.27 per share.
Given reduced expectations for the third quarter and the recent economic uncertainty, Exelon said its full-year earnings guidance is being reduced to a range of $4.30 to $4.45 per share.
Analysts had used its previous guidance as a base, saying they expected earnings per share of $4.50 to $4.75, resulting in a mean of $4.58 compared to last year's $3.86.
The drag of litigation, job cuts
Exelon said its core operations continue to perform well. The nuclear power plants, owned jointly with British Energy, have operated above target with a 96 percent capacity factor through August 31. Energy delivery operations, which distribute natural gas and electricity to some 5 million customers, have provided improved reliability with below-budget expenditures, and merger-related synergies continue to be on target for $148 million in savings this year.
But lower power prices and reduced market volatility due to cooler weather last summer hurt trading profits in the third quarter. In addition, its generation unit recorded an increase in its litigation reserves of $14 million.
Also reducing earnings will be severance costs of $30 million in the third quarter and $18 million in the fourth for the latest job cuts, which are in addition to the 2,900 positions previously announced in conjunction with the merger.
Exelon Enterprises has experienced weakness all year in its businesses related to the downturn in the telecommunications market. In the third quarter, the company said, it anticipates a $36 million write-down of its holdings in Corvis Corp. (CORV.O), a telecommunications equipment manufacturer. The Corvis shares were received through venture capital fund investments.
Margins in Exelon Infrastructure Services are greatly reduced, due to the fall-off in telecommunications infrastructure build-out across the country.
Copyright � 2003, Chicago Tribune
Exelon's earnings target cut raised investor concerns about the outlook for other utilities, triggeering a stock price decline that had a noticeable impact PPL Corp. and Duke Energy Co. shares.
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