Jefferies Reduces Estimates On Exelon

Jefferies is reducing its 2010 and 2011 EPS estimates on Exelon EXC to reflect an assumed higher tax rate associated with the company's manufacturing tax deduction. Qualified property placed into service after September 8, 2010 and before January 1, 2012 is eligible for 100% bonus depreciation for tax purposes. There is a 50% bonus for qualified property placed into service in 2012. The accelerated depreciation will generate roughly $1.0 billion in cash which the company will contribute to its pension. Because taxable income is reduced as a result of the bonus depreciation taken, there is also a reduction in the manufacturing tax deduction for which Exelon is eligible. Consequently, the effective tax rate will end up being higher in 2010-11. It is reducing its 2010 EPS estimate by $0.05, 2011 by $0.05, and maintains its 2012 estimate of $2.95. Jefferies has a Buy rating and $46.50 PT on EXC EXC is trading lower at $41.90