Constellation Energy’s Stock Gains Despite Mixed Q1 Results

Constellation Energy (NASDAQ:CEG) saw its stock jump by about 10% on Tuesday, even with mixed Q1 results. The company’s revenues exceeded estimates, though earnings slightly fell short. This surge is attributed to Constellation’s plans to sign long-term contracts for nuclear energy supply. These agreements enhance revenue visibility for Constellation, particularly in light of rising U.S. electricity demand driven by server farms for AI applications, the electrification of the auto industry, and a shift away from fossil fuels in manufacturing. Furthermore, these contracts bolster Constellation’s case for its pending $16.4 billion acquisition of Calpine, a significant operator in the gas-fueled power sector.

Image by Kurt Klement from Pixabay

Current Market Outlook for Constellation Energy

Despite this promising outlook, Constellation Energy’s stock, currently trading around $275, raises some concerns. Analysts suggest the stock may not be a strong buy given its mixed valuation metrics.

We reached our assessment by comparing Constellation’s current stock valuation with its operating performance in recent years and its overall financial health. Our examination of Constellation Energy across key factors such as Growth, Profitability, Financial Stability, and Downturn Resilience indicates that the company has a moderate operational performance and financial condition, as discussed below. For those seeking less volatility than individual stocks, the Trefis High-Quality portfolio may present a viable alternative, outperforming the S&P 500 with returns surpassing 91% since inception.

Valuation Comparison with the S&P 500

In terms of sales and profit per dollar, CEG Stock is valued comparably to the broader market.

• Constellation Energy has a price-to-sales (P/S) ratio of 3.0, compared to 2.8 for the S&P 500.
• The price-to-earnings (P/E) ratio for Constellation stands at 19.0, versus the benchmark’s 24.5.

Revenue Trends for Constellation Energy

Constellation Energy has experienced a slight decline in revenues over the past few years.

• The company’s average revenue growth rate over the last 3 years is 7.0%, while the S&P 500 saw an increase of 6.2%.
• However, revenues diminished by 5.4% from $25 billion to $24 billion over the past year, in contrast to the 5.3% growth for the S&P 500.
• Quarterly revenues decreased by 7.1%, dropping to $5.4 billion from $5.8 billion a year prior, while the S&P 500 experienced a 4.9% improvement.

Profitability Metrics

Constellation Energy’s profit margins lag behind many companies in the Trefis coverage universe.

• Operating Income over the last four quarters totaled $4.8 billion, reflecting a moderate Operating Margin of 20.6% compared to the S&P 500’s 13.1%.
• Operating Cash Flow (OCF) during this period amounted to $-2.5 billion, indicating a poor OCF Margin of -10.5% versus 15.7% for the S&P 500.
• Net Income for the same period was $3.7 billion, translating to a moderate Net Income Margin of 15.9% compared to the benchmark’s 11.3%.

Financial Stability of Constellation Energy

Constellation Energy maintains a strong balance sheet.

• The debt figure stands at $8.4 billion, while its market capitalization is $86 billion (as of 5/6/2025). This results in a Debt-to-Equity Ratio of 11.8%, compared to the S&P 500’s 21.5%. A lower ratio is considered preferable.
• Cash and cash equivalents consist of $3 billion of the $53 billion in total assets, yielding a Cash-to-Assets Ratio of 5.7%, less favorable than the S&P’s 15.0%.

Downturn Resilience of CEG Stock

In past downturns, CEG Stock has shown a greater decline relative to the S&P 500 index. As the U.S. economy hopes for a soft landing, there are questions about potential impacts of another recession.

Inflation Shock (2022)

• CEG Stock plummeted 55.7% from $97.16 on November 27, 2022, to $43.09 on February 23, 2022, compared to a 25.4% drop in the S&P 500.
• The Stock fully recovered by November 25, 2022.
• Since then, it has risen to a high of $347.44 on January 26, 2025, and currently trades around $275.

Conclusion: Overall Assessment for CEG Stock

In summary, Constellation Energy’s performance across examined parameters can be categorized as follows:

• Growth: Neutral
• Profitability: Weak
• Financial Stability: Strong
• Downturn Resilience: Neutral
• Overall: Neutral

This aligns with CEG’s moderate valuation, leading to the conclusion that while it is reasonably priced, it carries some risks, making it a neutral recommendation.

[Note: The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.]