The Zacks Utility - Electric Power industry, supported by its regulated structure offer, stable returns and long-term earnings. Utilities operate under a regulated framework, enabling companies to recover costs and earn predictable returns. They offer attractive dividends and stable returns, making them a reliable defensive investment choice. Utilities are now producing more electricity from clean sources to meet rising demand from customers.
Electricity demand in the United States is rising due to higher residential demand, the reshoring of industries and the construction of large AI-based data centers. Efficiently catering to rising demand not only requires higher electricity generation but also needs to be supported by proper transmission & distribution lines and essential infrastructure.
Amid the rising importance of transmission and distribution companies, let us discuss Exelon Corporation EXC and FirstEnergy Corporation FE. These two electric utilities have major investments in infrastructure development and grid modernization, making them comparable in the utility space.
Exelon stands out with seven fully regulated transmission and distribution utilities. The company is well poised to meet rising demand from its high-density customers and data-center customers. A major portion of Exelon’s distribution revenues is decoupled, which insulates the top line from the impact of load fluctuations and leads to stable earnings. Exelon invests substantially in infrastructure projects and continues to prioritize grid reliability and modernization so that it can efficiently serve its customers.
FirstEnergy, with its regulated structure and extensive transmission and distribution assets, efficiently serves six million customers and supports rising data center demand. Its strategic capital investment for infrastructure development supports rate base growth and renewable expansion. The company’s ‘Energize365’ is a multi-year grid evolution platform, prioritizing customer affordability, with rates at or below those of in-state peers. It improves service quality and supports the company’s long-term growth initiatives.
Exelon and FirstEnergy are among the leading utilities. Examining their fundamentals side by side can reveal which stock presents the most attractive investment opportunity.
EXC & FE’s Earnings Growth Projections
The Zacks Consensus Estimate for FE’s earnings per share is pegged at $2.73 for 2026 and $2.94 for 2027, suggesting year-over-year growth of 7.06% and 7.89%, respectively. FE’s long-term (three to five years) earnings growth is currently pinned at 7.64%.
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On the other side, EXC’s earnings per share are pegged at $2.85 for 2026 and $3.04 for 2027, suggesting year-over-year growth of 2.89% and 6.87%, respectively. EXC’s long-term earnings growth is currently pinned at 6.03%.
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Debt to Capital
The Zacks Utilities sector is a capital-intensive one and continuous investment is required for infrastructure and technological upgradation and expanding operations. These utilities combine internally generated cash flows with borrowed funds from capital markets to finance long-term investments, ensuring steady growth and reliable service delivery.
Exelon's debt-to-capital currently stands at 63.21% compared with FirstEnergy’s 65.6%. Both companies are using debt to fund their business. Both EXC's and FE’s debt levels are higher than the industry’s 61.04%, with FE higher, indicating greater reliance on borrowed funds.
Return on Equity
Return on Equity (“ROE”) is an important measure of financial performance. It indicates how efficiently a company is utilizing shareholders’ funds to generate returns. ROE highlights management’s effectiveness in utilizing invested capital to grow earnings and enhance shareholder value.
FirstEnergy’s current ROE is 10.5%, outperforming Exelon, which reports a slightly lower ROE of 9.97%. FE utilizes shareholder capital more efficiently and generates higher profits, though both companies’ returns remain below the industry average of 10.82%.
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Capital Investment Plans
Utilities’ operations are capital-intensive, as huge funds are required for infrastructure development, enhancing system reliability and maintaining the existing assets. Transmission and distribution utilities must regularly invest in the expansion and development of new pipelines and safely provide electricity to customers even during extreme weather conditions.
Exelon plans to invest $41.3 billion in 2026-2029 to strengthen distribution, transmission and gas delivery structure, supporting service reliability and rate base growth. FirstEnergy aims to invest $36 billion in 2026-2030 to strengthen its electric transmission, distribution and generation infrastructure and expand renewable energy capacity.
Price Performance
FirstEnergy shares have gained 9.6% in the past three months compared with Exelon’s rally of 9.1% over the same time period.
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Summing Up
Exelon and FirstEnergy both gain from a rise in load growth and data center demand, and are making substantial infrastructure investments to serve millions of customers across the United States.
FE’s stronger earnings estimate revisions, higher return on equity and better price performance make it a more attractive choice in the utility sector.
Based on the above discussion, FirstEnergy currently has an edge over Exelon, though both presently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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This article originally published on Zacks Investment Research (zacks.com).