Constellation Energy (CEG) stock is spiraling Monday after a U.S. regulatory agency made a decision that is impacting nuclear power producers. And this is overshadowing the utility company's impressive earnings report.
In the three months ended September 30, Constellation's operating revenue increased 7.2% year over year to $6.55 billion. Its earnings per share (EPS) rose 28.6% from the year-ago period to $2.74.
In a statement, Constellation CEO Joe Dominguez said that clean energy is the most important commodity in the world right now and that the opportunity to add it to the grid can help meet the nation's growing needs around artificial intelligence (AI).
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"The importance of AI and the data economy to America's economic competitiveness and national security can't be overstated, and Constellation will do our part to meet the moment,” Dominguez added. "Our customers are looking for clean, emissions-free energy that they can rely on in every hour of every day, and nothing exemplifies that imperative more than our 20-year agreement with Microsoft (MSFT) to restart the Crane Clean Energy Center."
Constellation's third-quarter results came in ahead of analysts' expectations. Wall Street was anticipating revenue of $5.7 billion and earnings of $2.64 per share, according to Yahoo Finance.
As a result of its strong performance in the first nine months of its fiscal year, Constellation raised the low end of its earnings-per-share guidance for the year. The company now anticipates earnings in the range of $8 to $8.40 per share, up from its previous forecast of $7.60 to $8.40.
Why is Constellation Energy stock down?
Nuclear power stocks are taking a hit this morning after the Federal Energy Regulatory Commission (FERC) rejected a deal between Amazon.com (AMZN) and Talen Energy (TLN), according to Bloomberg. The deal would have allowed one of Amazon's data centers to use more power from an adjacent nuclear power plant owned by Talen.
"From our extensive investor conversations, very few investors, including us, expected an outright FERC rejection of the Interconnection Service Agreement (ISA)," says Jefferies analyst Julien Dumoulin-Smith, adding that the firm expected a "sharp negative share response" from Constellation, Talen, Vistra (VST) and PSEG (PEG).
Is CEG stock a buy, sell or hold?
Even with today's slide, Constellation Energy shares have nearly doubled on a year-to-date basis. And Wall Street thinks the utility stock has more room to run.
According to S&P Global Market Intelligence, the average analyst target price for CEG stock is $282.56, representing implied upside of more than 20% to current levels. Additionally, the consensus recommendation is Buy.
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