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Stock Downgrades: Pepco Holdings Has Lost Its Power


Wall Street ratings agencies set the tone for today's stock market.

Electric utility Pepco Holdings (NYSE:POM) yesterday surged 17.42% to easily top the entire S&P 500 (INDEXSP:.INX) after announcing it will be bought by Exelon (NYSE:EXC) for $6.8 billion. The combined company will create America's largest power distributor, a gas and electric behemoth that can call on approximately 10 million customers. Exelon scores an analyst upgrade today, but Pepco Holdings goes the other way, with merger doldrums likely to take center stage now that shares are no longer trading on fundamentals. Regulatory risk relating to merger approval may also be an issue.
Peter Cottontail endured an utterly awful Easter, but the indefatigable Energizer (NYSE:ENR) bunny just made funny money for the stock market. Call it the Roger Rabbit rally. In a fitting requiem for dearly departed Bob Hoskins, who often played gangster-tough Cockneys not above inflicting a bit of assault and battery when the situation required, the battery behemoth surged 14.31%. Clearly inspired by the quite literally sterling work done by bunniesDow Industrials (INDEXDJX:.DJI) hit a historic high. In 1979, the most powerful person on the planet lost any hope of reelection when he claimed that killer wabbits were hunting him. The meltdown at Three Mile Island also made horrific headlines that year; yesterday, nuclear power player Exelon proved that the atomic energy industry has since come back from the brink in a big way.
The heaviest earnings day of the week is here, with the likes of ExxonMobil (NYSE:XOM), Expedia (NASDAQ:EXPE), and LinkedIn (NYSE:LNKD) all due to release results.
Now let's look at this morning's rating reductions, an eclectic bunch that features a beleaguered handbag maker, plus headline stock Pepco Holdings.

Clean Harbors (NYSE:CLH): Robert W. Baird reduces its rating to Neutral from Outperform with an amended price objective of $59. It sees the risk-reward ratio as less compelling at current levels.
Coach, Inc.: Morgan Stanley moves the suffering stock to Underweight from Equal-Weight.
Emulex (NYSE:ELX): Shares are now Neutral from Overweight at Piper Jaffray.
Exco Resources (NYSE:XCO): RBC Capital cuts the company to Underperform from Perform and also trims its target price by $1 to $4. Shareholders may have overly optimistic assumptions for the firm's near-term gas leverage, the brokerage believes.
GFI Group (NYSE:GFIG): The investment outfit gets downgraded to Perform from Outperform by Keefe Bruyette.
Pepco Holdings: The electric utility is taken to Market Perform from Outperform with Wells Fargo.

Also see:

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No positions in stocks mentioned.
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