How Did This Utility Stock Become the 3rd Best Performer in the S&P 500, with 63% Year-to-Date Gain?

How Did This Utility Stock Become the 3rd Best Performer in the S&P 500, with 63% Year-to-Date Gain?

The nuclear energy comeback is in full swing this year, and it’s all about tackling climate change while keeping the lights on. Back in 2020, nuclear was already the second-largest low-carbon power source, accounting for a whopping 26% of the total. Now, with the help of cutting-edge tech like artificial intelligence (AI), nuclear energy is poised to play an even more crucial role in the fight against climate change.

All of which helps to explain how one unexpected contender has risen to the top of the S&P 500 Index ($SPX) this year. Right behind AI server heavyweight Super Micro Computer (SMCI) – and not too far behind SMCI’s favorite customer, Nvidia (NVDA) – it’s humble utility stock Constellation Energy Group (CEG) that has emerged as the No. 3 stock on the S&P 500 this year. With its 63% gain in 2024, CEG sails past even Micron Technology (MU), and even clinched the title of February’s top gainer among SPX members. 

Boasting an impressive portfolio of nuclear power plants, CEG is on a mission to deliver clean, reliable, and affordable energy. Let’s examine some of the key factors that have propelled Constellation Energy’s meteoric stock rise in 2024 so far.

About Constellation Energy Stock

Back on Dec. 6, 2023, Constellation stepped onto the global stage at the COP28 climate summit. They joined forces with a coalition of 120 nuclear industry heavy-hitters from 25 countries, all united by a pledge to at least triple the global output of zero-carbon nuclear energy by 2050. 

The icing on the cake for CEG came in late March when the Biden administration announced a $6.1 billion federal funding plan to keep struggling nuclear plants afloat through the 2030s. This was a major boost for the company’s shares, and a clear signal of the government’s commitment to nuclear energy. 

Cut to today, and CEG has been on an absolute tear, with its stock price fresh off new highs shy of $200 set in late March. Over the past 52 weeks, CEG is up an impressive 148%.

Along with its remarkable share price appreciation, the company also offers an annualized dividend of $1.41 per share, which translates to a forward dividend yield of 0.75% at current levels. With a sustainable payout ratio of 28.14%, CEG strikes a healthy balance between returning cash to shareholders and retaining funds for future growth initiatives. 

CEG’s recent Q4 2023 earnings report was mixed, as the net loss of $0.11 per share fell short of estimates. However, revenue of $5.8 billion topped expectations, and the company’s 2024 guidance was well-received. Constellation is targeting full-year operating earnings of $7.23 to $8.03 per share, well above Wall Street’s $6.38 consensus.

For the current quarter, analysts are expecting CEG to report a profit of $1.88 per share, up sharply from $0.29 per share a year ago.

Constellation’s Bold Moves in Nuclear Energy

In a bold move that underscores their commitment to a cleaner future, the company broke new ground in early March 2024 by offering the nation’s first corporate green bond specifically aimed at financing the development of new nuclear energy projects. This green bond issuance, worth $900 million, is a clear signal that Constellation is all-in on clean energy generation, and they’re betting big that nuclear power will be a cornerstone of our sustainable energy landscape.

And on Feb. 15, Constellation made another big bet on their nuclear future by filing a license renewal application with the Nuclear Regulatory Commission (NRC) for its Clinton Clean Energy Center in Clinton, Illinois. The press release noted, “Illinois would need to site more than 1,000 new wind turbines to generate the same amount of electricity that Clinton will be able to provide under an extended license.”

Previously, in late 2023, Constellation completed the acquisition of a 44% ownership stake in the South Texas Project Electric Generating Station (STP), a hefty 2,645-megawatt, dual-unit nuclear plant that’s one of the largest in the U.S. – about as Texan as it gets, sitting some 90 miles southwest of Houston. With this move, Constellation snagged approximately 1,100 megawatts of the plant’s output, further cementing their status as a heavyweight in the nuclear energy sector.

With their eyes firmly set on the horizon, Constellation’s performance suggests that the nuclear energy renaissance is more than just a buzzword – it’s a blueprint for growth.

How Much Higher Can Constellation Energy Stock Rise?

The analysts have been poring over their spreadsheets, and what they’re forecasting is pretty compelling for this nuclear energy giant. With 11 analysts weighing in, the consensus is a “moderate buy.” Breaking it down, 7 analysts are bullish with “strong buy” ratings, while 4 maintain a “hold” stance, suggesting a cautious optimism.

But the stock’s breakout rally seems to have caught Wall Street by surprise, with CEG trading north of the mean price target of $151.90. Based on Wednesday’s closing price, the stock has room to rise 5.6% before touching its Street-high target of $201.00.

The Bottom Line on CEG Stock

Wrapping up, Constellation Energy Corp’s stellar run so far in 2024 run really spotlights its clout in the nuclear comeback. Smart strategic moves, global policy support, and solid financials have CEG raising the bar in energy excellence. As we pivot to greener pastures, CEG stock is a smart pick for investors looking to tap into the nuclear energy space.

On the date of publication, Ebube Jones did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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