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Bull of the Day: Constellation Energy (CEG)

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Constellation Energy ((CEG - Free Report) ) is now a $70 billion generator and marketer of electricity throughout the Mid-Atlantic and Midwest after shares rallied 90% this year.

My colleague Ben Rains, who runs the Zacks Alternative Energy Innovators portfolio, bought CEG in late January and his members are enjoying the bulk of those gains as nuclear power regains its stature and attracts capital for long-term energy development projects.

In a recent article, Ben described why CEG remains a core holding...

Constellation Energy is a nuclear energy titan that produces roughly 10% of all clean and renewable energy in the U.S. Constellation benefits from the energy-focused aspects of the Inflation Reduction Act, helping provide a price floor for nuclear power and put it on a level playing field with other clean energy sources.

Once shunned, nuclear is primed to transform into the powerhouse of the global energy transition. The U.S. co-led in December 2023 a coalition of over 20 countries from four continents that pledged to triple nuclear energy capacity by 2050.

Nuclear energy will grow as the world attempts to transition away from fossil fuels as energy demand soars to fuel the AI boom. Constellation is already partnering with big tech firms for nuclear power and CEG is attempting to be at the cutting edge of next-gen nuclear reactors.

Constellation plans to expand through mergers and acquisitions and return more capital to shareholders via buybacks and dividends.

(end of CEG notes from Ben Rains June 14 article 2 AI Stocks Not Named Nvidia or SMCI to Buy on the Dip)

Earnings Update: Analysts Propelled to Raise Estimates

Constellation Energy posted its Q1 results on May 9 and grew its adjusted quarterly earnings from $0.78 per share in the year-ago period to $1.82 per share, topping our $1.64 a share estimate.

In response to the results and outlook, Wall Street analysts raised this year's EPS consensus from $7.41 to $7.62. And in the past 90 days, the 2025 Zacks EPS Consensus has jumped 14% to $8.95.

Here was commentary from Ben to his Alternative Energy Innovators members following the company report...

The nuclear powerhouse’s GAAP net income soared 860% to $2.78 per share. As I mentioned yesterday, Wall Street is not too concerned with CEG’s exact top and bottom-lines at the moment. CEG has fallen way short of our bottom line estimates in three out of the past five quarters.

Constellation’s revenue fell 18% YoY to $6.2 billion, falling well shy of the Zacks Consensus Estimate of $8.4 billion.

Investors care much more about its longer-term outlook within the booming nuclear energy industry and its ongoing commitment to return value to shareholders.

Constellation’s total operating expenses fell 29% YoY to $5.35 billion. On top of that, CEG grew its operating income from $31 million in the prior-year quarter to $813 million.

Constellation stock soared last quarter after it started targeting long-term base EPS growth of at least 10% through the decade.

The company today affirmed its full-year 2024 adjusted earnings guidance range of $7.23 to $8.03 per share. The current Zacks consensus of $7.43 a share is below the midpoint outlook.

CEG repurchased nearly 3 million shares and deployed approximately $500 million during the quarter, bringing its cumulative repurchases to over $1.5 billion. CEG also authorized an additional $1 billion authority to repurchase shares under its previously announced program.

Moody’s during the quarter upgraded Constellation’s credit rating and assigned a stable outlook based on CEG’s improved debt coverage metrics and strong financial performance, “driven by climate policies that recognize the value of nuclear as a reliable clean energy resource.”

Constellation issued what it called the first U.S. corporate green bond to feature nuclear.

It issued a $900 million, 30-year term green bond to finance projects such as “nuclear uprates that will increase production of clean, carbon-free energy… and advance other technologies, including the production of clean hydrogen, energy storage systems, wind repowering and carbon-free energy solutions for our commercial customers.”

Constellation is extending the lives of its nuclear plants and increasing their output while attempting to roll out next generation nuclear reactors at its sites.

“The largest and most critical industries in America are coming to us to power their businesses with clean energy in every hour of every day, providing opportunities for sustainable growth as we lead the nation’s transition to a clean-energy economy,” CEO Joe Dominguez said in prepared remarks.

(end of Ben's commentary to his members)

Bottom line on CEG: Nuclear energy is back in a big way and for investors who stay the course of this long-term megatrend resurgence, the dividends should keep paying for decades.

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