S&P 500 component Constellation Energy increased its full-year profit guidance Tuesday even as second-quarter earnings and revenue came in slightly under analyst expectations. CEG stock jumped Tuesday.
Constellation Energy reported Tuesday that Q2 adjusted earnings grew more than 2% to $1.68 per share while revenue increased less than 1% to $5.47 billion. Analysts expected EPS of $1.71 per and sales totaling $5.55 billion.
The company on Tuesday also raised its full-year EPS guidance, expecting between $7.60-$8.40 per share for 2024. Constellation Energy's previous view was $7.23-$8.03 per share.
Analyst consensus has 2024 EPS coming in at $7.76, which would represent a 40% gain compared to 2023.
Observers awaited the nuclear power provider's outlook after PJM Interconnection, the largest U.S. electrical grid operator, at its annual power market auction last week announced prices jumped more than 800%.
Chief Executive Joe Dominguez said on the Q2 earnings call Tuesday that the decision to raise 2024 guidance now instead of in Q3 "should tell you how strongly we feel the business is performing."
Constellation Energy also reported that it "accelerated" its share repurchase program in Q2, completing $500 million of repurchases. In April, the nuclear energy stock authorized an additional $1 billion for stock buybacks and spent more than $500 million to repurchase shares in Q1.
Constellation Energy, an S&P 500 stock, surged 6.5% to 181.05 during market trade on Tuesday. On Monday, CEG stock managed to advance 1.7% to 169.97, amid massive selloffs across the market.
Ahead of earnings, shares were down more than 10% in August, on pace for its third consecutive monthly decline.
Grid Prices Are Surging
Meanwhile, PJM, a major U.S. regional transmission organization (RTO), last week said that 2025-2026 prices for power plants came in at $262.92 per megawatt-day, up more than 800% compared to last year's prices. The auction secured 135,684 megawatts for June 1, 2025 through May 31, 2026.
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The energy mix secured by PJM includes 48% from gas, 21% from nuclear, 18% from coal, 1% from solar, 1% from wind, 4% from hydro, and the remainder from other resources, according to PJM.
"The significantly higher prices in this auction confirm our concerns that the supply/demand balance is tightening across the RTO. The market is sending a price signal that should incent investment in resources," Chief Executive Manu Asthana said in a news release.
It is still unclear how the jump in capacity prices will affect customer bills, according to analysts. Estimates last year said capacity costs accounted for around 8% of customer electric bills.
"In light of the forecasted load growth in PJM, we expect to see higher sustained pricing for capacity to address reliability needs and send more accurate price signals to retain, operate and relicense our plants as well well as incentivizing the development of new resources and customer demand response," Dominguez told analysts on Tuesday.
Constellation Energy executives also reported Tuesday that the company's 2025 enhanced gross margin expectation is $250 million, due to its commercial backlog and "the higher prices from the PJM capacity auction."
AI And Nuclear
S&P 500 component Constellation Energy has been riding the artificial intelligence energy wave in 2024, with the stock price gaining 43%. Artificial intelligence — and the data centers needed to train the systems — are expected to boost energy demand throughout this decade. In the U.S., McKinsey & Co. projects that data center energy demand will grow around 10% every year through 2030.
Additionally, in 2022, the 2,700 U.S. data centers consumed around 4% of the country's total electricity generated electricity, according to the International Energy Agency. The agency projects that by 2026, such centers will make up 6% of electricity use.
Many technology companies are investing in or partnering with nuclear power providers to ensure energy supplies for their data centers.
Morgan Stanley analysts have proclaimed in recent months that a "nuclear renaissance" is underway.
They wrote that nuclear power, while still a divisive issue, is making a comeback. The firm sees $1.5 trillion in investment in new capacity through 2050.
Top hyperscalers — the largest cloud, data center and AI operators — include Amazon.com's AWS, Microsoft, Meta and Alphabet. In March, Talen Energy announced its sale of a 960-megawatt data center campus to AWS for $650 million, sited near its Pennsylvania nuclear plant.
S&P 500: Deal Or No Deal
AWS is also reportedly nearing a deal with Constellation Energy for power supplied directly from a nuclear plant on the East Coast, according to the Wall Street Journal. In a July interview with IBD, Constellation Energy Chief Financial Officer Daniel Eggers would not comment about the potential deal.
"We are having, as probably many are, meaningful conversations with large players in the technology industry who all want to move forward with AI and the data center needs associated with them," Eggers said.
On Tuesday, Dominguez told analysts and investors that CEG is "continuing to do well in our discussions and negotiations with data center companies."
Meanwhile, Eggers also told IBD in July that analysts could be overshooting Constellation Energy's demand growth as a result of artificial intelligence and data centers.
"When we see some of the discussion out there of how big this is or how fast it is (growing), I think we have to take a bit of a measured view on how fast this is all coming," he said.
He suspects there is a fair amount of double counting, "or even more than double counting that you're seeing in those numbers."
Eggers points out that Constellation Energy has excess reserves and room to absorb more demand growth. The company is looking to add around 1,000 megawatts of capacity, he said.
During Constellation Energy's Q1 earnings call in May, Dominguez said AI data centers are not going to be on CEG nuclear plants this year. Dominguez estimated projects will begin in 2026-2028 and it "ramps over time as the data centers are built."
S&P 500: Constellation Energy Stock
Constellation Energy stock has retreated around 30% since hitting an all-time high 236.30 on May 24. The S&P 500 stock is now testing support at its 200-day moving average.
Constellation management said in May it will grow base earnings by at least 10% through the end of the decade.
Founded in 1999, Constellation Energy has gone through several phases. After an earlier stint as a public company, it merged with Exelon in 2012 as part of a deal worth roughly $8 billion. While with Exelon, the company's moniker became Constellation Energy Generation. It then split from the utility giant in early 2022.
Constellation Energy owns 25% of U.S. nuclear power reactors. Further, it provides energy to more than 20% of the major commercial and industrial customers in the country.
Nuclear power has declined in recent years, with 13 plants closing since 2013. The industry faces safety concerns about spent fuel rod storage, possible radiation leaks and other environmental issues. The cost of building new nuclear power plants remains cost-prohibitive as cheaper and more competitive energy sources — including wind, solar and natural gas — have gained in popularity.
Constellation Energy stock has a 61 Composite Rating out of a best-possible 99. The S&P 500 stock also has an 90 Relative Strength Rating and a 38 EPS Rating.
Please follow Kit Norton on X @KitNorton for more coverage.
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