Nuclear energy stocks have been in focus this week, with many of the biggest gainers in the group selling off sharply in response to an unfavorable ruling from the Federal Energy Regulatory Commission (FERC) regarding a data center deal between Talen Energy (TLN) and Amazon (AMZN). The setback followed major rallies in names like Vistra Energy (VST), Constellation Energy (CEG), and Centrus Energy (LEU) as Magnificent Seven hyper-scalers increasingly moved to strike exclusive nuclear power deals to fuel their data center ambitions.
However, as investors parse through the eventual impact of the FERC decision, it seems likely that any dips in these names could be buying opportunities - particularly since many top nuclear energy investments are also dividend-paying utility stocks. Here's a closer look at one dividend stock with nuclear energy upside.
Entergy Corporation Outpaces the Market
Entergy Corp. (ETR) is an energy utility company that focuses on the generation, transmission, and distribution of electricity. They are involved in the production of power fueled by natural gas (NGZ24), coal, oil (CLZ24), nuclear, and hydro sources.
Based out of New Orleans and valued at $31.29 billion by market cap, Entergy distributes power to residential and business customers across Louisiana, Arkansas, Texas, Mississippi, and Arkansas.
ETR stock has outperformed the broader market by a decent margin this year, up 47.2% in 2024 compared to a gain of 25.7% for the S&P 500 Index ($SPX). The shares are down about 7% from their recently set highs.
Entergy pays a quarterly dividend of $1.20 per share, which translates to a yield of 3.29% at current levels. The stock has paid dividends consistently for 29 years, with nine years of steady increases.
Entergy Reports Mixed Q3
Entergy Corp. reported its third-quarter results on Oct. 31, with earnings of $644.9 million, or $2.99 per share, surpassing analysts' estimates of $2.91 per share. Revenue for the quarter came up just short at $3.39 billion, down 5.7% YoY and slightly below estimates of $3.46 billion.
Operating expenses during Q3 came to $2.26 billion, down 7.7% YoY. The energy company ended the quarter with a cash reserve of $1.41 billion and long-term debt of $26.56 billion.
"We achieved outstanding results across operational, regulatory, resilience, and growth dimensions. These outcomes are the result of strong execution and leveraging a stakeholder engagement model that starts with the customer and ensures value is created for all stakeholders," said CEO Drew Marsh.
Entergy’s management also revised their 2024 guidance. They now expect earnings in the range of $7.15 to $7.35 per share, compared to the previous guidance of $7.05 to $7.35 per share.
Is ETR Stock a Good Buy for Nuclear Energy Upside?
On the conference call, management discussed plans to expand its current nuclear capacity of roughly 5KW.
"Beyond our sizable existing fleet and capabilities, we are well positioned to evaluate and ultimately pursue new nuclear options," said Marsh. “We are actively exploring potential power upgrades at our existing facilities that could total as much as 300 megawatts,” as well as projects that could include a new, previously permitted nuclear reactor and small nuclear modular reactor (SMR) technology ventures, added the CEO.
With 18 analysts in coverage, ETR is a “Moderate Buy" on Wall Street. However, the shares closed nearly flat on Friday with their average price target of $149.03.
Nevertheless, with a price/earnings-to-growth (PEG) ratio of 2.67 - lower than its five-year average multiple, and the sector median - ETR looks like a reasonably valued investment in long-term nuclear energy upside right now.
On the date of publication, Ruchi Gupta 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.
