Constellation Energy Stands Out in the Utility Sector Amid Regulatory Concerns
With a market cap of $71.5 billion, Baltimore-based Constellation Energy Corporation (CEG) specializes in electricity generation and sales. The company also offers natural gas, renewable energy, and various energy-related products across multiple regions in the U.S., utilizing a diverse range of power generation assets.
Over the past year, shares of the electric utility company have significantly outperformed the broader market. CEG stock has surged 90.2% during this period, whereas the S&P 500 Index ($SPX) has rallied 35.5%. For 2024, CEG shares have risen by 98.1%, in contrast to SPX’s 25.5% gain year-to-date.
When compared to the Utilities Select Sector SPDR Fund’s (XLU) 32.6% return over the past year and a 24.8% year-to-date gain, CEG has clearly outshone its peers.
Despite an impressive Q3 adjusted EPS of $2.74, Constellation Energy’s stock dropped 12.5% on November 4. This decline was largely driven by fears surrounding regulatory risks connected to its nuclear power agreement with Microsoft. The Federal Energy Regulatory Commission (FERC) had previously rejected a similar deal for Talen Energy’s Amazon data center, sparking concerns for Constellation’s project. Furthermore, the company’s high valuation—trading at nearly 29 times the projected 2024 earnings and offering a low dividend yield—added to investor worries.
For the current fiscal year ending in December, analysts are projecting CEG’s EPS to grow 64.5% year-over-year to $8.24. The company’s earnings surprises tell a mixed story; it has exceeded consensus estimates in three of the last four quarters but missed on one occasion.
Among the 18 analysts following the stock, the consensus rating is a “Moderate Buy,” indicating 11 “Strong Buy” ratings and seven “Holds.”
This outlook is slightly more optimistic than three months ago, when there were 10 “Strong Buy” ratings on the stock.
On November 7, Barclays lowered its price target for Constellation Energy to $270 while keeping an “Overweight” rating after the company’s Q3 earnings report.
As of now, CEG is trading below the average price target of $275.82, while the Street-high price target of $342 suggests a potential upside of 49.5%.
More Stock Market News from Barchart
On the date of publication, Sohini Mondal did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
