S&P 500 component Constellation energy (CEG) reports second-quarter earnings and revenue Tuesday morning, with analysts expecting a more than 30% rise in profits. Observers are awaiting the nuclear power supplier’s outlook after PJM Interconnection, the largest U.S. grid operator, announced last week that prices had risen more than 800% at its annual electricity market auction. CEG shares rose Monday.
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Analysts expect Constellation Energy to grow Q2 earnings 35% to $1.71 per share, while revenue will rise 2% to $5.55 billion. In May, Constellation Energy reaffirmed an adjusted full-year earnings forecast of $7.23-$8.03 per share. The analyst consensus is for 2024 earnings per share of $7.76, which would represent a 40% gain compared to 2023.
Meanwhile, PJM, a major U.S. regional transmission organization (RTO), said last week that power plant prices for 2025-2026 came in at $262.92 per megawatt day, up more than 800% from last year’s prices. The auction secured 135,684 megawatts for June 1, 2025, through May 31, 2026.
AI is driving a ‘nuclear renaissance.’ Bill Gates and Jeff Bezos are involved.
According to PJM, the energy mix that PJM has secured consists of 48% natural gas, 21% nuclear, 18% coal, 1% solar, 1% wind, 4% hydro and the rest from other sources.
“The significantly higher prices in this auction confirm our concerns that the supply/demand balance in the RTO is tightening. The market is sending a price signal that should stimulate investment in resources,” Chief Executive Manu Asthana said in a press release.
Analysts say it is unclear how the jump in capacity prices will affect customers’ bills. Last year, capacity costs accounted for about 8% of customers’ electricity bills, according to estimates.
Constellation Energy, an S&P 500 stock, rose 1.7% to 169.97 in regular market trading Monday. Shares have fallen more than 14% in August, heading for their third straight monthly decline.
AI and nuclear energy
S&P 500 component Constellation Energy has ridden the wave of artificial intelligence energy in 2024, sending its stock soaring 43%. Artificial intelligence — and the data centers needed to train the systems — are expected to drive energy demand this decade. In the U.S., McKinsey & Co. predicts that data center energy demand will grow about 10% annually through 2030.
In addition, the 2,700 U.S. data centers consumed about 4% of the country’s total electricity generation in 2022, according to the International Energy Agency. The agency predicts that such centers will account for 6% of electricity consumption by 2026.
Many technology companies are investing in or partnering with nuclear energy suppliers to secure the energy supply for their data centers.
Morgan Stanley analysts have been proclaiming in recent months that a “nuclear renaissance” is underway.
They wrote that nuclear power, while still a divisive issue, is making a comeback, with the company forecasting $1.5 trillion in new capacity investment through 2050.
Top hyperscalers — the largest cloud, data center and AI operators — include: Amazon.nl‘s (AMZN) AWS, Microsoft (MSFT), Meta (META) and Alphabet (GOOGL). In March, Talen Energy announced the sale of a 960-megawatt data center campus to AWS for $650 million, located near its nuclear power plant in Pennsylvania.
S&P 500: Deal or No Deal
According to the Wall Street Journal, AWS is also nearing a deal with Constellation Energy for power delivered directly from an East Coast nuclear plant. In an interview with IBD in July, Constellation Energy Chief Financial Officer Daniel Eggers declined to comment on the potential deal.
“We, like probably many others, are having meaningful conversations with major players in the technology sector who are all looking to make progress with AI and the related needs of data centers,” Eggers said.
Eggers also told IBD that analysts may be overestimating Constellation Energy’s demand growth due to artificial intelligence and data centers.
“When we see how big this is and how fast it’s growing, we have to be a little bit careful about how fast this is all going,” he said.
He suspects that there is quite a bit of double counting, “or even more than the amount of double counting you see in those numbers.”
Eggers pointed out that Constellation Energy has excess reserves and room to absorb more demand growth. The company is looking to add about 1,000 megawatts of capacity, he said.
During Constellation Energy’s Q1 earnings call in May, Chief Executive Joe Dominguez said AI data centers won’t be placed on CEG nuclear plants this year. Dominguez estimated that projects will begin in 2026-2028 and that it “increases over time as the data centers are built.”
S&P 500: Constellation Energy Stocks
Constellation Energy shares have fallen about 30% since hitting a record high of 236.30 on May 24. The S&P 500 stock is now testing support at its 200-day moving average.
Constellation management indicated in May that core earnings will grow by at least 10% through the end of the decade.
Founded in 1999, Constellation Energy has been through several phases. After a stint as a publicly traded company, it merged with Exelon in 2012 as part of a deal valued at approximately $8 billion. While at Exelon, the company was renamed Constellation Energy Generation. It then spun off from the utility giant in early 2022.
Constellation Energy owns 25% of the nation’s nuclear reactors and supplies power to more than 20% of the nation’s major commercial and industrial customers.
Nuclear power has declined in recent years, with 13 plants closed since 2013. The industry faces safety concerns about storage of spent fuel rods, possible radiation leaks and other environmental issues. The cost of building new nuclear plants remains prohibitive as cheaper, more competitive energy sources — including wind, solar and natural gas — have gained popularity.
Constellation Energy stock has a Composite Rating of 55 out of a maximum of 99. The S&P 500 stock also has a Relative Strength Rating of 87 and an EPS Rating of 38.
Follow Kit Norton on X @KitNorton For more information.
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