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Should You Buy, Sell or Hold Constellation Energy Stock at 25.85X P/E?
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Constellation Energy Corporation (CEG - Free Report) is currently trading at a premium compared with the Zacks Alternate Energy-Other industry. With a forward 12-month price/earnings ratio of 25.85X, the stock is priced a tad above the industry average of 24.68X and the broader Zacks Oil and Energy sector’s 11.26X.
CEG’s Valuation Chart
Image Source: Zacks Investment Research
The company continues to add more clean energy to the grid by acquiring new nuclear plants and extending the lives of existing plants through new licenses. Constellation Energy is maintaining a high nuclear fleet capacity factor and achieved 94.4% last year. CEG’s units continue to have a high capacity factor and achieved a 95.0% capacity factor for the third quarter and a similar high capacity factor is expected for fourth-quarter.
Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.
The CEG stock closed at $232.34 on Dec. 10. In the past year, the company’s shares have gained 101.4% compared with the industry’s 61.9% rally. CEG has also outperformed the S&P 500’s growth of 33.2% and the sector’s return of 12.7%.
CEG Stock’s Price Performance (One Year)
Image Source: Zacks Investment Research
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 and evaluate the stock’s investment potential.
Factors in Favor of CEG Stock
Constellation Energy’s ability to produce a high volume of emission-free electricity from its nuclear plants is the primary contributor to its stable performance. The company’s fleetwide capacity factor has remained more than 94% over the past decade, or about 4% higher than the industry average.
Demand for clean electricity produced by Constellation Energy is on the rise, as clean power generated from nuclear power plants continued to support the system amid a drop in production volumes from renewable projects due to natural causes, even when electricity demand remained high.
An increase in artificial intelligence (AI) usage in the future should spur demand for clean electricity. Data centers operate 24/7, 365 days a year, and electricity demand from these centers is destined to increase, as AI-based queries need substantially higher power than traditional Internet usage. Few big tech companies are planning to shift their AI centers next to Constellation's nuclear plants for uninterrupted clean power supply.
The company operates nuclear plants safely, efficiently and reliably. The company plans to invest nearly $5.1 billion during 2024-2025. The fresh investment will be directed to improve capacity in its existing nuclear power plants. Improvement in capacity at nuclear plants could add up to one gigawatt of new clean energy capacity over the next decade and assist the company in meeting the greater need for clean energy demand.
Constellation Energy is launching a $350 million initiative to increase the output and lifespan of the company's portfolio of renewable energy sources by enhancing efficiency, increasing output, and extending the life of its Criterion wind project in Oakland, MD, by 20 years. This action will deliver more carbon-free electricity to the area.
Constellation Energy Raises Shareholder Value
Constellation Energy continues to make share repurchases and has repurchased shares worth $1 billion year to date. 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.
It 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.
Constellation Energy’s Earnings Estimates Move Up
The Zacks Consensus Estimate for CEG’s 2024 and 2025 earnings per share has moved up 2.9% and 1.6%, respectively, in the past 60 days.
Another firm, Duke Energy (DUK - Free Report) , has a sizeable power production from nuclear power plants. The Zacks Consensus Estimate for DUK’s 2024 earnings per share has decreased by 0.3% in the past 60 days, while 2025 estimates have remained unchanged in the same time period.
Image Source: Zacks Investment Research
CEG Returns Higher Than the Industry
Constellation Energy’s trailing 12-month return on equity of 16.26% is better than the industry average of 10.49%. Return on equity, a profitability measure, reflects how effectively a company utilizes its shareholders’ funds to generate income.
Image Source: Zacks Investment Research
To Sum up
Constellation Energy is benefiting from the increasing demand for clean energy in its service territories. CEG’s strong production capacity will allow it to meet rising demand.
The company is currently trading at a premium. It is better to remain invested in this Zacks Rank #3 (Hold) stock and enjoy the benefits of rising earnings estimates, dividends and share buybacks.
Image: Bigstock
Should You Buy, Sell or Hold Constellation Energy Stock at 25.85X P/E?
Constellation Energy Corporation (CEG - Free Report) is currently trading at a premium compared with the Zacks Alternate Energy-Other industry. With a forward 12-month price/earnings ratio of 25.85X, the stock is priced a tad above the industry average of 24.68X and the broader Zacks Oil and Energy sector’s 11.26X.
CEG’s Valuation Chart
Image Source: Zacks Investment Research
The company continues to add more clean energy to the grid by acquiring new nuclear plants and extending the lives of existing plants through new licenses. Constellation Energy is maintaining a high nuclear fleet capacity factor and achieved 94.4% last year. CEG’s units continue to have a high capacity factor and achieved a 95.0% capacity factor for the third quarter and a similar high capacity factor is expected for fourth-quarter.
Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.
The CEG stock closed at $232.34 on Dec. 10. In the past year, the company’s shares have gained 101.4% compared with the industry’s 61.9% rally. CEG has also outperformed the S&P 500’s growth of 33.2% and the sector’s return of 12.7%.
CEG Stock’s Price Performance (One Year)
Image Source: Zacks Investment Research
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 and evaluate the stock’s investment potential.
Factors in Favor of CEG Stock
Constellation Energy’s ability to produce a high volume of emission-free electricity from its nuclear plants is the primary contributor to its stable performance. The company’s fleetwide capacity factor has remained more than 94% over the past decade, or about 4% higher than the industry average.
Demand for clean electricity produced by Constellation Energy is on the rise, as clean power generated from nuclear power plants continued to support the system amid a drop in production volumes from renewable projects due to natural causes, even when electricity demand remained high.
An increase in artificial intelligence (AI) usage in the future should spur demand for clean electricity. Data centers operate 24/7, 365 days a year, and electricity demand from these centers is destined to increase, as AI-based queries need substantially higher power than traditional Internet usage. Few big tech companies are planning to shift their AI centers next to Constellation's nuclear plants for uninterrupted clean power supply.
The company operates nuclear plants safely, efficiently and reliably. The company plans to invest nearly $5.1 billion during 2024-2025. The fresh investment will be directed to improve capacity in its existing nuclear power plants. Improvement in capacity at nuclear plants could add up to one gigawatt of new clean energy capacity over the next decade and assist the company in meeting the greater need for clean energy demand.
Constellation Energy is launching a $350 million initiative to increase the output and lifespan of the company's portfolio of renewable energy sources by enhancing efficiency, increasing output, and extending the life of its Criterion wind project in Oakland, MD, by 20 years. This action will deliver more carbon-free electricity to the area.
Constellation Energy Raises Shareholder Value
Constellation Energy continues to make share repurchases and has repurchased shares worth $1 billion year to date. 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.
It 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.
Constellation Energy’s Earnings Estimates Move Up
The Zacks Consensus Estimate for CEG’s 2024 and 2025 earnings per share has moved up 2.9% and 1.6%, respectively, in the past 60 days.
Another firm, Duke Energy (DUK - Free Report) , has a sizeable power production from nuclear power plants. The Zacks Consensus Estimate for DUK’s 2024 earnings per share has decreased by 0.3% in the past 60 days, while 2025 estimates have remained unchanged in the same time period.
Image Source: Zacks Investment Research
CEG Returns Higher Than the Industry
Constellation Energy’s trailing 12-month return on equity of 16.26% is better than the industry average of 10.49%. Return on equity, a profitability measure, reflects how effectively a company utilizes its shareholders’ funds to generate income.
Image Source: Zacks Investment Research
To Sum up
Constellation Energy is benefiting from the increasing demand for clean energy in its service territories. CEG’s strong production capacity will allow it to meet rising demand.
The company is currently trading at a premium. It is better to remain invested in this Zacks Rank #3 (Hold) stock and enjoy the benefits of rising earnings estimates, dividends and share buybacks.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.