Constellation Energy Corporation CEG is scheduled to report its third-quarter 2024 results on Nov. 4.
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The Zacks Consensus Estimate for CEG’s third-quarter revenues is pegged at $6.21 billion, indicating 1.59% growth from the year-ago reported figure.
The consensus estimate for earnings is pegged at $2.72 per share. The Zacks Consensus Estimate for CEG’s third-quarter earnings has increased 7.5% in the past 60 days. The estimate suggests a year-over-year decline of 20.35%.
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CEG Stocks Earnings Surprise History
Constellation Energy’s earnings beat the Zacks Consensus Estimate in two trailing quarters, the average surprise being 10.86%.
What the Zacks Model Unveils
Our proven model predicts a likely earnings beat for Constellation Energy this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. That is the case here, as you can see below.
Constellation Energy Corporation Price and EPS Surprise
Constellation Energy Corporation price-eps-surprise | Constellation Energy Corporation Quote
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Earnings ESP: CEG has an Earnings ESP of +3.92%.
Zacks Rank: Constellation Energy currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Factors Likely to Have Shaped CEG’s Q3 Earnings
Constellation Energy’s third-quarter earnings are likely to have gained from its efficiently running nuclear fleet. The annual nuclear capacity factor has been more than 94% in the past five years compared with the national average of nearly 91%. The high-capacity factor and availability of the power plant are expected to continue and will provide ample clean electricity to the company to serve its customers.
Constellation Energy expects to generate an additional net income in 2024-2025 through organic means like wind repowering, nuclear uprates, nuclear license renewals and clean hydrogen production. These factors are likely to have contributed to third-quarter earnings.
The company efficiently provides clean electricity to nearly 21% of the Competitive Commercial & Industrial (C&I) customers in the United States. Rising demand for clean electricity from the C&I group is likely to have boosted the company’s performance in the third quarter.
Importance of Nuclear Power in the United States
Per a report from the United States Environmental Protection Agency, the nuclear reactors operated by the companies contribute nearly 20% of all electricity used in the United States. Despite the inherent risk involved in running a nuclear power plant, nuclear units are being developed, and reactors are being taken out of slumber to provide clean power to customers.
Recently, Constellation Energy decided to restart the nuclear-powered Three Mile Island Unit 1, which remained idle for five years for economic reasons to meet the long-term power supply requirement of Microsoft Corporation MSFT.
Since the demand from AI-driven data centers is destined to increase further from the current levels, big companies like Amazon AMZN are collaborating with Dominion Energy D to explore the possibility of developing small modular nuclear reactors to procure reliable clean energy.
Price Performance
CEG’s shares have gained 41.7% in the past six months compared with the industry’s rally of 22.4%.
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CEG Stock is Trading at a Premium
The company is currently trading at a P/E F12M of 29.93X, a premium compared to its industry average of 24.04X.
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Investment Thesis
Constellation Energy, with its clean nuclear power generation fleet, is poised to benefit from rising demand from large AI-driven centers. The big tech operators will need reliable, clean power to operate data centers and are planning to shift their AI centers next to Constellation Energy’s nuclear plants for an uninterrupted clean power supply.
The company’s current ratio currently stands at 1.35, indicating its financial strength to meet near-term debt obligations. The drop in interest rates will also assist this capital-intensive company to fund its future capital projects.
Constellation Energy’s operations are highly regulated and could be negatively impacted by legislative and regulatory actions. The company’s operating results are influenced by seasonal factors and weather variability.
To Sum Up
Constellation Energy’s investment in increasing clean energy production, expansion of operations through organic and inorganic initiatives and rising demand from its customers place it well for further growth. The rising demand from data centers will further boost prospects for this company.
Despite the headwinds, Constellation Energy, with its high-quality expanding production assets, is currently an ideal candidate to add to your portfolio.
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