Last year, Utility Company Constellation Energy's shares experienced an unexpected surge, increasing by an impressive 91%.
Utility stocks might have their place in certain investor portfolios, but let's be real, they're not typically high-growth plays. So how on earth did Constellation Energy (CEG, -0.74%) manage to soar 91% in 2024 according to S&P Global Market Intelligence?
To put it frankly, this unexpected climb isn't all that shocking when you consider the circumstances.
Constellation Energy's timing was spot-on
While Constellation Energy's stock chipped away at gains throughout 2024, the majority of its astounding growth came in two major surges.
The first surge happened in February. This followed the release of the company's guidance for the year ahead. Thanks to robust guarantees on electricity production from its nuclear reactor fleet, Constellation offered 2024 earnings that more than met expectations. To add fuel to the fire, the outlook suggested they could overcome inflationary pressures for the time being, keeping their yearly earnings growth at a targeted 10%.
The second surge came in September, when Constellation announced its plans to restart a dormant nuclear reactor at Three Mile Island's Harrisburg facility. This move is intended to meet the power needs of one of Microsoft's many data centers. While restarting the reactor won't happen for a few years, this decision could be just the beginning of a new era for Constellation as a leading nuclear power producer. After all, they're the top producer in the U.S., accounting for over 80% of their annual energy output. Their size works to keep costs down.
And that's saying something, considering the growing availability of renewable energy alternatives and the subsequent decline in fossil fuel use. Despite this, the demand for new production capacity is significantly outpacing the growth of renewables. To bridge this gap, the U.S. Department of Energy aims to triple the nation's current nuclear power output to 200 gigawatts by 2050.
Not surprisingly, investors have found Constellation to be the ideal candidate to capitalize on this nuclear tailwind, buying shares throughout the year - news or no news.
The growth hasn't stopped, neither. Just last week, Constellation announced its intention to acquire Calpine, a natural gas and geothermal power company. The deal aims to help Constellation become a zero-emissions utility by 2040. Interestingly, when companies make such acquisitions, their shares typically suffer. Constellation, however, saw its stock price rise as a result.
The Wrong Time for Buyers?
Investors seem to have their feelings right. Currently, Constellation Energy stands head and shoulders above the rest of the utility market.
Buyers might have acted a bit too enthusiastically, though. Constellation's shares rocketed 91% last year, and with this year's 36% gain so far, they're now trading around $305. Comparatively, analysts anticipate only a $276.29 target price. While waiting for a correction might be wise, Constellation Energy's long-term prospects look solid, given its position as a nuclear power leader and its robust growth strategy.
- Utility stocks might not typically offer high-growth opportunities, but Constellation Energy's finance strategy proved otherwise in 2024.
- The investing community was attracted to Constellation Energy's nuclear energy investments, which are expected to contribute significantly to its earnings, as outlined in their financial forecasts.
- The forecasted demand for new energy production capacity far outpaces the growth of renewable energy sources, making investments in nuclear power companies like Constellation an attractive option for those seeking stable finance returns.
- Despite some analysts predicting a potential correction in Constellation Energy's stock price, the company's strong financial performance and position as a leading nuclear power producer make it an appealing investment for the long term, based on financial analysis.
