S&P 500 leader Vistra (VST) and S&P 500 component Constellation Energy (CEG) both report third-quarter earnings and revenue next week. The two nuclear energy stocks have rallied around 30% since late September.
Constellation Energy leads early Monday with third-quarter financials. Analysts predict the company’s Q3 earnings will grow 18% to $2.66 per share with sales totaling $5.71 billion, down 6.5% compared to a year ago. Meanwhile, analyst consensus puts Vistra Q3 EPS ahead 9% to $1.64 on revenue of $5.01 billion, up 22% vs. Q3 2023. Vistra, a nuclear power utilities play, reports before the market opens on Thursday, along with several other nuclear-related companies.
In early August, Constellation Energy increased its full-year profit guidance even as second-quarter earnings and revenue came in slightly under analyst expectations. The company expects 2024 EPS between $7.60-$8.40 per share for 2024. Constellation Energy’s previous view was $7.23-$8.03 per share.
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Morgan Stanley analyst David Arcaro wrote Wednesday that he expects full-year guidance to be narrowed with Q3 results.
“Multiyear guidance updates, capital allocation and strategic updates will come with Q4 earnings in our view rather than this quarterly report,” Arcaro wrote.
Constellation management said in May it will grow base earnings by at least 10% through the end of the decade.
S&P 500 Catches Nuclear Fever
Nuclear energy-related plays have been on a tear since late September when Constellation Energy announced a two-decade contract with Microsoft (MSFT) to provide nuclear power for the tech giant’s data centers.
Then in October, Amazon.com (AMZN) and Alphabet (GOOGL) also announced decisions to invest in developing the emerging small modular reactors, or SMRs, technology. SMRs do not currently exist but there are a number of companies working to develop the technology.
Amazon in March made an early move toward nuclear, paying $650 million for a Talen Energy (TLNE) nuclear-powered data center campus in Pennsylvania.
Constellation Energy gained a fraction to 263.09 during market trade on Friday. The stock advanced 1% in October after rallying 32% in September. Meanwhile, S&P 500 leader Vistra edged down less than 1% to 124.80 Friday. Vistra has also been in reported discussions for power deals at both its nuclear and natural gas-powered plants.
Shares of Constellation Energy and Vistra have surged around 26% and 34%, respectively, since the Microsoft-Constellation Energy deal on Sept. 20.
VST stock is up 224% on the year while Constellation Energy has advanced 125%.
AI And Nuclear Energy
So far in 2024, nuclear power and utility stocks have been riding the artificial intelligence energy wave.
Artificial intelligence — and the data centers needed to train the systems — are expected to boost energy demand throughout this decade. In the U.S., McKinsey & Co. projects that data center energy demand will grow from around 4% currently, as percentage of total energy demand, to 11%-12% by 2030.
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Many technology companies are investing in or partnering with nuclear power providers to ensure energy supplies for their data centers.
Morgan Stanley analysts have proclaimed in recent months that a “nuclear renaissance” is underway.
They wrote that nuclear power, while still a divisive issue, is making a comeback. The firm sees $1.5 trillion in investment in new capacity through 2050.
Meanwhile, Morgan Stanley analysts wrote that the Constellation-Microsoft deal “proves out the value of nuclear power for hyperscalers, with higher prices for future deals.”
The Microsoft Deal
Constellation Energy said in September it will fire back up Pennsylvania’s Three Mile Island Unit 1, which ended operation in 2019, to provide the necessary energy to meet Microsoft’s needs over the life span of the 20-year contract. The company estimates the reactor will add 835 megawatts to the grid.
The Three Mile Island Unit 1 reactor is adjacent to the Unit 2 reactor, which shut down in 1979 after a partial meltdown at the nuclear power plant.
Accidents at Three Mile Island, Chernobyl and Fukushima loom large in the minds of utilities and their insurers. In addition, long-term safety and environmental concerns over storing and disposing of spent radioactive fuel rods create resistance to new nuclear development. Nuclear power has declined in recent years, with 13 plants closing since 2013.
Constellation Energy announced at the time that to restart the Three Mile Island reactor, “significant investments will be made to restore the plant, including the turbine, generator, main power transformer and cooling and control systems.”
The process also requires U.S. Nuclear Regulatory Commission approval following a comprehensive safety and environmental review, as well as permits from relevant state and local agencies.
Founded in 1999, Constellation Energy has gone through several phases. After an earlier stint as a public company, it merged with Exelon in 2012 as part of a deal worth roughly $8 billion. While with Exelon, the company’s moniker became Constellation Energy Generation. It then split from the utility giant in early 2022.
Constellation Energy owns 25% of U.S. nuclear power reactors. Further, it provides energy to more than 20% of the major commercial and industrial customers in the country.
Nuclear Stocks Take Off
Small modular reactor-focused companies have taken off recently. Shares of Oklo (OKLO) — the nuclear power startup backed by OpenAI head Sam Altman — surged 177% in October. Nano Nuclear Energy (NNE) advanced 35% last month.
Meanwhile, NuScale Power (SMR) gained 65.3% in October. NuScale Power reports third-quarter earnings and revenue late Thursday with analysts expecting a loss of 14 cents, down from a 22-cents per share loss a year ago. Sales are expected to fall 44% to $3.9 million.
Uranium refiner Cameco (CCJ) also announces third-quarter earnings on Thursday. Analyst consensus projects Q3 EPS declining 17% to 19 cents with revenue totaling $562 million, up 36% compared to a year ago.
Canada-based Cameco is one of the world’s largest providers of uranium with utilities around the globe relying on the company to provide nuclear fuel solutions.
Constellation Energy stock has an 89 Composite Rating out of a best-possible 99. The S&P 500 stock also has a 97 Relative Strength Rating and a 54 EPS Rating.
Please follow Kit Norton on X @KitNorton for more coverage.
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