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Is Constellation Energy (CEG) a Buy Ahead of Q2 Earnings?
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Constellation Energy Corporation (CEG - Free Report) is going to report its second-quarter 2024 results on Aug 6.
The Zacks Consensus Estimate for CEG’s second-quarter revenues is pegged at $5.30 billion, indicating a 2.67% decline from the year-ago reported figure.
The consensus estimate for earnings is pegged at $1.43 per share. The Zacks Consensus Estimate for CEG’s second-quarter earnings has declined 23.9% in the past 60 days. The estimate suggests a year-over-year decline of 44.1%.
Image Source: Zacks Investment Research
Solid Earnings Surprise History
Constellation Energy’s earnings beat the Zacks Consensus Estimate in three out of the trailing four quarters, while lagging in one quarter, the average surprise being 49.42%.
Image Source: Zacks Investment Research
What the Zacks Model Unveils
Our proven model does not conclusively predict an 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 not the case here, as you can see below.
You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Constellation Energy’s nuclear fleet is well maintained and operated compared with its peers. 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 in 2024 and will provide ample clean electricity to the company to serve its customers. The high-capacity factor of nuclear units is likely to have boosted second-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 performance of the company in the second quarter.
Constellation Energy utilizes nuclear energy to produce clean electricity. The nuclear production tax credit (PTC) in the IRA provides a stable foundation for consistent and growing earnings for the company. PTC provides revenue certainty for the company while maintaining its ability to capture power price upside from the market, which is likely to have contributed to second-quarter earnings. Other utilities like Entergy Corporation (ETR - Free Report) and Duke Energy Corporation (DUK - Free Report) also have nuclear power generation assets and enjoy similar benefits.
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 second-quarter earnings.
Constellation Energy’s second-quarter earnings are likely to have benefited from ongoing share repurchases. It repurchased shares worth $1 billion in 2023 and has already started to buy back more shares in 2024.
Price Performance and Valuation
CEG’s shares have gained 37.4% in the past six months compared with the industry’s rally of 32.9%.
Price Performance (6 Months)
Image Source: Zacks Investment Research
The company is currently trading at P/E F12M of 20.74, a premium compared to its industry average of 18.24, which is justified given its premier position in the competitive C&I market and investment-grade balance sheet.
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 big tech companies are planning to shift their AI centers next to Constellation's nuclear plants for uninterrupted clean power supply.
The company’s current ratio currently stands at 1.43, indicating its financial strength to meet near-term debt obligations.
Despite having a well-run nuclear plant fleet, the Nuclear Regulatory Commission’s (NRC) actions could negatively impact the operations and profitability of CEG’s nuclear-generating fleet. Events at nuclear plants owned by others could cause NRC to initiate further stringent compliances over which Constellation Energy has no control. This could increase the operating costs of the company.
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.
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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Is Constellation Energy (CEG) a Buy Ahead of Q2 Earnings?
Constellation Energy Corporation (CEG - Free Report) is going to report its second-quarter 2024 results on Aug 6.
The Zacks Consensus Estimate for CEG’s second-quarter revenues is pegged at $5.30 billion, indicating a 2.67% decline from the year-ago reported figure.
The consensus estimate for earnings is pegged at $1.43 per share. The Zacks Consensus Estimate for CEG’s second-quarter earnings has declined 23.9% in the past 60 days. The estimate suggests a year-over-year decline of 44.1%.
Image Source: Zacks Investment Research
Solid Earnings Surprise History
Constellation Energy’s earnings beat the Zacks Consensus Estimate in three out of the trailing four quarters, while lagging in one quarter, the average surprise being 49.42%.
Image Source: Zacks Investment Research
What the Zacks Model Unveils
Our proven model does not conclusively predict an 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 not the case here, as you can see below.
You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Earnings ESP: CEG has an Earnings ESP of 0.00%.
Zacks Rank: Constellation Energy currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Factors Likely to Have Shaped CEG’s Q2 Earnings
Constellation Energy’s nuclear fleet is well maintained and operated compared with its peers. 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 in 2024 and will provide ample clean electricity to the company to serve its customers. The high-capacity factor of nuclear units is likely to have boosted second-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 performance of the company in the second quarter.
Constellation Energy utilizes nuclear energy to produce clean electricity. The nuclear production tax credit (PTC) in the IRA provides a stable foundation for consistent and growing earnings for the company. PTC provides revenue certainty for the company while maintaining its ability to capture power price upside from the market, which is likely to have contributed to second-quarter earnings. Other utilities like Entergy Corporation (ETR - Free Report) and Duke Energy Corporation (DUK - Free Report) also have nuclear power generation assets and enjoy similar benefits.
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 second-quarter earnings.
Constellation Energy’s second-quarter earnings are likely to have benefited from ongoing share repurchases. It repurchased shares worth $1 billion in 2023 and has already started to buy back more shares in 2024.
Price Performance and Valuation
CEG’s shares have gained 37.4% in the past six months compared with the industry’s rally of 32.9%.
Price Performance (6 Months)
Image Source: Zacks Investment Research
The company is currently trading at P/E F12M of 20.74, a premium compared to its industry average of 18.24, which is justified given its premier position in the competitive C&I market and investment-grade balance sheet.
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 big tech companies are planning to shift their AI centers next to Constellation's nuclear plants for uninterrupted clean power supply.
The company’s current ratio currently stands at 1.43, indicating its financial strength to meet near-term debt obligations.
Despite having a well-run nuclear plant fleet, the Nuclear Regulatory Commission’s (NRC) actions could negatively impact the operations and profitability of CEG’s nuclear-generating fleet. Events at nuclear plants owned by others could cause NRC to initiate further stringent compliances over which Constellation Energy has no control. This could increase the operating costs of the company.
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.
Despite the headwinds, Constellation Energy, with its high-quality expanding production assets, is currently an ideal candidate to add to your portfolio.