Constellation Energy delivered third-quarter earnings below estimates early Tuesday, a surprise loss for the nuclear energy leader. However, the company, which is fresh off its split from utility giant Exelon, remains optimistic about support for nuclear power in the recently signed Inflation Reduction Act. Constellation Energy stock edged dropped Tuesday.
Constellation Energy Earnings
Estimates: Analysts projected earnings of 67 cents a share with sales dropping 11% to $3.9 billion, according to FactSet.
Results: Constellation Energy reported a loss of 57 cents per share while revenue increased 37% to $6 billion.
The company cited a continued decrease in its capacity revenue. That, along with increased labor, contracting and material costs, are the main reasons for its third quarter loss.
"Our long-term outlook has strengthened significantly with passage of the landmark Inflation Reduction Act," CEO Joe Dominguez said in a statement Tuesday. Dominguez added that the act "will allow us to create value and drive America's clean energy transition."
Meanwhile, Constellation Energy stock dropped 6.4% to 87.54 during Tuesday's market trading. On Monday, CEG shares closed at 93.50, down 0.9% on the day. The stock recently cleared a flat base buy point of 90.28. That buy range extends to 94.79, according to MarketSmith analysis.
Constellation Energy stock is around 8% above its 50-day moving average. It has been outperforming the S&P 500 since Oct. 27. Since Constellation Energy began trading in February, CEG shares have gained around 70%.
The company reported a 34 cents per share loss in the second quarter, missing estimates. This was after Constellation earned 32 cents per share in the first quarter and $1.90 per share in the fourth quarter of 2021. Sales came in at $5.4 billion in the second quarter, topping views.
Additionally, Constellation Energy stock ranks 6th in the IBD Energy-Alternative/Other industry group. Also, CEG stock has an 81 Composite Rating out of 99. It has a 98 Relative Strength Rating, an exclusive IBD Stock Checkup gauge for share-price movement that tops at 99. Additionally, the stock's EPS rating, which gauges earnings strength, stands at 31.
Constellation Energy Bets On Nuclear
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. Then it split from the utility giant on Feb. 1.
Constellation Energy Bets On Nuclear To Fuel Profit Run
Around 65% of CEG's portfolio is nuclear, making it the largest owner of that sort of power generation in the U.S. The portfolio of Baltimore-based Constellation Energy is primarily nuclear. But it also has hydroelectric, wind and solar facilities that power the equivalent of 15 million homes.
Inflation Reduction Act Optimism
Constellation Energy executives have voiced excitement about the Inflation Reduction Act. That bill includes around $369 billion earmarked for climate and energy initiatives. Some of those are specific spending provisions for nuclear power. These include a zero-emission nuclear energy production tax credit to incentivize keeping existing plants in operation.
Another factor is the Biden administration is also aiming for net-zero greenhouse gas emissions in the energy sector by 2035. And across the full U.S. economy by 2050.
Constellation Energy sees itself as an answer to the push for carbon-free energy. The company has set a goal to achieve 100% carbon-free power generation by 2040. It sees that coming primarily on the back of the 13 power plants and 23 nuclear reactors it operates. There are a total of 93 nuclear reactors and 54 power plants in the U.S.
However, nuclear power use as 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. And the cost of building new nuclear power plants remains prohibitive as cheaper and more competitive energy sources — including wind, solar and natural gas — have gained in popularity.
Please follow Kit Norton on Twitter @KitNorton for more coverage.
