Constellation Energy Corporation CEG shares have gained 6.9% since it reported third-quarter 2024 results on Nov. 4. Constellation Energy reported third-quarter 2024 earnings of $2.74 per share, which surpassed the Zacks Consensus Estimate of $2.72 by 0.7%. The bottom line also increased 28.6% from the year-ago figure of $2.13.
The CEG stock closed at $241.59 on Nov. 7, and in the past year, the company’s shares have gained 101.8% compared with the industry’s 61% rally. CEG has also outperformed the S&P 500’s growth of 39.8% and the Zacks Oil-Energy sector’s return of 13.7%.
CEG Price Performance (one year)
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Is it a good time to add this alternate energy stock to your portfolio? To assess, let’s delve deep into the factors influencing the increase in share price, review the third-quarter results and evaluate the stock’s investment potential.
Highlights of CEG’s Q3 Earnings
Revenues totaled $6.6 billion, which surpassed the Zacks Consensus Estimate of $6.21 billion by 5.5%. The top line increased 7.2% from the year-ago figure of $6.11 billion.
During the third quarter, CEG executed a 20-year power purchase agreement with Microsoft Corporation MSFT to support the restart of Three Mile Island Unit 1, renamed the Crane Clean Energy Center, retired in 2019 for economic reasons. Under the agreement, Microsoft will purchase the output generated from the renewed plant as part of its goal to help power its data centers in PJM with clean energy.
Excluding the Salem and South Texas Project (STP) Generating Stations, CEG’s nuclear plants at ownership achieved a 95.0% capacity factor for the third quarter of 2024, compared with 97.2% for the third quarter of 2023. The year-over-year decline in capacity factor is due to higher planned refueling outage days compared with the year-ago quarter.
During the quarter, CEG’s commercial team continued to create exceptional value by optimizing its generation and load businesses. As a consequence, the company raised its adjusted (non-GAAP) operating earnings guidance range for the full year to $8.00 – $8.40 per share, up from $7.60 – $8.40 per share.
Constellation Energy’s Earnings Surprise History
Constellation Energy’s earnings are consistent, visible, and easy to calculate. It is expected to increase over time through returns on organic growth, PTC inflation, and share repurchases. The company has reported positive earnings surprises in the last three reported quarters.
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Factors Acting as Tailwind for CEG Stock
Constellation Energy’s primary power production comes from its nuclear fleet and it is well-positioned in terms of nuclear fuel. The company has created a diverse and resilient portfolio that can withstand the Russian supply disruption and has engaged in multiple long-term uranium supply contracts running well into the 2030s. These steps will ensure continued production from its nuclear fleet.
Constellation Energy is also benefiting from artificial intelligence (AI) and data center-driven clean power demand. Per a Business Insider report, major tech companies are going to invest nearly $1 trillion in data centers in the next five years. CEG can gain from rising clean energy demand from data centers as AI-driven data centers require more electricity than traditional data center racks.
Operating nuclear-powered generating units provides an additional advantage to Constellation Energy. Nuclear plants can reliably produce carbon-free energy 24/7 in all weather conditions and run for up to two years without needing to be refueled. These plants are a perfect fit to provide 24/7 electricity to the rising clean power demand from AI-driven data centers.
Constellation Energy’s Earnings Estimates Moving North
The Zacks Consensus Estimate for CEG’s 2024 and 2025 earnings per share has moved up 2.5% and 0.8%, respectively, in the past 30 days. The upward revisions in earnings estimates indicate analysts’ increasing confidence in the stock.
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CEG Stock Returns Higher Than the Industry
Constellation Energy’s trailing 12-month return on equity of 16.26% is better than the industry average of 12.54%. Return on equity, a profitability measure, reflects how effectively a company utilizes its shareholders’ funds to generate income.
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CEG Rewards Shareholders Through Buybacks and Dividends
Constellation Energy continues to make share repurchases and has repurchased shares worth $1 billion in the first nine months of 2024. It has $1 billion remaining under its share repurchase program. The company has more than $2.3 billion of capital left to be allocated for 2024 and 2025.
CEG pays a quarterly dividend to its shareholders. The company aims to increase its dividend by 10% annually, subject to its board’s approval. Check CEG’s dividend history here.
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CEG Stock Trades at a Premium
Constellation Energy is currently trading at a premium compared with its industry on a forward 12-month P/E basis.
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Summing Up
Constellation Energy is benefiting from the increasing demand for clean energy in its service territories, driven by the development of AI-driven data centers. CEG’s strong production capacity will allow it to meet rising demand, and the company reported positive earnings surprises in the trailing three quarters.
Those who already own this Zacks Rank #3 (Hold) stock would do well to retain it in their portfolio and enjoy the benefits of dividends, share buybacks and rising earnings estimates.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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