Baltimore-based utility company Constellation Energy Corp. (CEG) is a provider of clean and sustainable energy solutions to homes, businesses, communities, public corporations, and wholesale customers such as municipalities. Constellation uses power sources including nuclear, wind, hydro, and solar generation to provide electricity to more than 16 million homes and establishments.
Why is CEG Stock Outperforming?
Thanks to renewed interest in nuclear energy as a cleaner fuel source amid ambitious forecasts for data center power usage, Constellation Energy stock has been a notable outperformer this year. Not only is CEG among the top-performing stocks in the S&P 500 Index ($SPX), up more than 107% year-to-date, it has also easily outpaced the 19.3% returns of the VanEck Uranium and Nuclear Energy ETF (NLR) over the same time frame.
Following its impressive run higher this year, Constellation Energy is now valued at a formidable $74.7 billion by market cap. However, with CEG stock now down about 16% from its October highs, now could be an opportune time for investors to buy the dip in this outperforming nuclear energy stock.
Notably, CEG also pays a quarterly dividend of $0.35 per share, which results in a forward yield of 0.59% at current levels.
Constellation Energy Reports Third-Quarter Results
Constellation Energy announced its Q3 results last month on Nov. 4. The utility posted a profit of $2.74 per share, up 21.24% year over year to beat analysts' estimates by $0.02 per share. Revenue of $6.55 billion easily outpaced the market’s $6.21 billion expectation, and rose 7.2% from the year-ago period.
Management updated their full-year 2024 operating earnings guidance to a range between $8.00-$8.40 per share, an increase of $0.60 per share at the midpoint, and comfortably higher than the consensus forecast. Longer term, Constellation is targeting at least 10% EPS growth through 2028.
Despite the positive earnings report, CEG stock fell sharply after the results, which coincided with a negative regulatory ruling for its nuclear energy-exposed utility peer, Talen Energy (TLN). During the third quarter, Constellation reached a 20-year power purchase agreement with Microsoft (MSFT) to restart a reactor at Three Mile Island, which is not expected to be impacted by the FERC ruling on Talen's deal.
The Billionaires Buying CEG Stock
During the third quarter, Philippe Laffont’s hedge fund, Coatue Management, snapped up 2.8 million shares of Constellation Energy, representing a 57% increase in its position. Previously, the billionaire investor bought 2.9 million shares of the utility company during Q2, more than doubling the fund's CEG stake in the process.
Ray Dalio's Bridgewater Associates also bought shares of CEG during Q3, albeit in slightly smaller amounts. Bridgewater now holds about $199 million worth of Constellation Energy shares, compared to Laffont's roughly $2 billion stake.
Overall, hedge funds increased their holdings of CEG by 4.5 million shares during the most recent quarter.
Is Constellation Energy Stock a Buy?
Analysts rate the nuclear energy stock as a “Moderate Buy,” with the mean price target of $284.24 reflecting an upside potential of 18.2% from current levels.
CEG is valued at a forward adjusted price/earnings-to-growth (PEG) ratio of 2.27, which is a discount to the utility sector median of 2.72. For investors expecting the nuclear energy name to resume its uptrend, now could be a good time to buy the dip in Constellation Energy stock.
