Constellation Energy (CEG) is one of the best S&P 500 stocks Friday, up more than 22% at last check, after the utility company said it will acquire independent power producer Calpine for a net purchase price of $26.6 billion. The merger of the two firms will create the nation's largest clean energy provider.
Constellation said it will use 50 million CEG shares priced at the 20-day volume-weighted average price (VWAP) of approximately $237.98 apiece and $4.5 billion in cash to fund the purchase. It will also assume roughly $12.7 billion of Calpine's net debt.
"This acquisition will help us better serve our customers across America, from families to businesses and utilities," said Constellation CEO Joe Dominguez in a statement. "By combining Constellation's unmatched expertise in zero-emission nuclear energy with Calpine's industry-leading, best-in-class, low-carbon natural gas and geothermal generation fleets, we will be able to offer the broadest array of energy products and services available in the industry."
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
The transaction is expected to immediately begin boosting Constellation's earnings, with the company projecting an increase of more than 20% to EPS in 2026 and adding at least $2 per share to earnings in future years. It's also expected to add more than $2 billion of free cash flow annually.
The transaction is subject to the customary closing conditions, including regulatory approvals from numerous agencies, Constellation said. If all goes as planned, the transaction is expected to close within 12 months.
Is Constellation Energy stock a buy, sell or hold?
The utility stock was one of the top performers of 2024, ending the year up nearly 93% on a total return basis (price change plus dividends) and it remains a top stock pick this year too. Indeed, Wall Street is overwhelmingly bullish on the large-cap stock.
According to S&P Global Market Intelligence, the consensus recommendation among the 18 covering analysts that it tracks is Buy.
However, analysts' price targets may need to be adjusted following the news of the acquisition. At last check, the average analyst price target of $279 represents a discount of more than 7% to current levels.
Financial services firm UBS Global Research is one of those with a Buy rating on CEG stock, along with a $289 price target.
After rumors of the deal surfaced earlier this week, UBS Global Research analyst William Appicelli said the deal would position Constellation "for a variety of market conditions and have more volumetric upside as power demand grows, as most expect it will in a meaningful manner."
He added that "the addition of a large gas portfolio opens the door for CEG to be more flexible in meeting future large load demand."
Related Content
- Why Walgreens Is the Best S&P 500 Stock After Earnings
- Analysts' Top S&P 500 Stocks to Buy Now
- Stock Picks That Billionaires Love
-
The Stoic Retirement: Ancient Wisdom for Today's RealityA "Stoic retirement" doesn't mean depriving yourself. It's a character-based approach to life and aging that can bring calm and clarity.
-
My Teen Crashed His Car and Now Our Insurance Has Tripled. What Now?Dealing with the costly aftermath of a teen car accident is stressful. Here are your options for navigating it.
-
11 Outrageous Ways To Spend Money in RetirementWhether you have excess cash to spend or want to pretend, here’s a look at 11 ridiculous ways retirees can splurge.
-
I'm a Financial Planner for Millionaires: Here's How to Give Your Kids Cash Gifts Without Triggering IRS PaperworkMost people can gift large sums without paying tax or filing a return, especially by structuring gifts across two tax years or splitting gifts with a spouse.
-
'Boomer Candy' Investments Might Seem Sweet, But They Can Have a Sour AftertasteProducts such as index annuities, structured notes and buffered ETFs might seem appealing, but sometimes they can rob you of flexibility and trap your capital.
-
AI Stocks Lead Nasdaq's 398-Point Nosedive: Stock Market TodayThe major stock market indexes do not yet reflect the bullish tendencies of sector rotation and broadening participation.
-
Got $100 to Gamble? These Penny Stocks Could Be Worth the RideVolatile penny stocks are high-risk plays with potentially high rewards. If you have $100 you can afford to lose, these three names are worth a look.
-
Quick Question: Are You Planning for a 20-Year Retirement or a 30-Year Retirement?You probably should be planning for a much longer retirement than you are. To avoid running out of retirement savings, you really need to make a plan.
-
Don't Get Caught by the Medicare Tax Torpedo: A Retirement Expert's Tips to Steer ClearBetter beware, because if you go even $1 over an important income threshold, your Medicare premiums could rise exponentially due to IRMAA surcharges.
-
I'm an Insurance Pro: Going Without Life Insurance Is Like Driving Without a Seat Belt Because You Don't Plan to CrashLife insurance is that boring-but-crucial thing you really need to get now so that your family doesn't have to launch a GoFundMe when you're gone.
-
Dow Adds 646 Points, Hits New Highs: Stock Market TodayIt was "boom" for the Dow but "bust" for the Nasdaq following a December Fed meeting that was less hawkish than expected.
