Constellation Energy (NASDAQ:CEG) gave investors a lot to unpack on August 6 with the release of its second-quarter earnings report. The report raised full-year adjusted operating earnings guidance to $11.50 to $12.50 per share and stacked on a run of nuclear contract wins and regulatory approvals tied to its Crane Clean Energy Center restart. The headline story is growth. The details show a company juggling more moving parts than it has in years.
Bull Case: The Contract Pipeline Keeps Growing
Constellation signed 920 megawatts of new long-term power purchase agreements in the quarter, contracts running 15 to 20 years that won’t start delivering power until 2029 through 2032. One, a 176-megawatt deal with Walmart (NASDAQ:WMT), split into two 15-year contracts that start in 2029 and 2030, will fund a 30-megawatt expansion at the Dresden Clean Energy Center, located in Illinois. The batch averages 18.5 years in length, adding to earlier 20-year agreements with Microsoft Corp. (NASDAQ:MSFT) and Meta Platforms (NASDAQ:META).
The bigger prize is Crane, the plant once known as Three Mile Island Unit 1. FERC granted a waiver letting Constellation shift grid connection rights to Crane, and the NRC approved its fuel license amendment, clearing two of the last hurdles before the 835 megawatt unit restarts in 2027 to serve its Microsoft contract. Constellation also filed to extend the licenses of its Ginna and Nine Mile Point 1 reactors in New York out to 2049, stretching value from assets it already owns. Management guided to 20% annualized adjusted earnings growth through 2029, a number that excludes any contracts signed after this quarter.
Bear Case: Costs And Outages Cloud The Picture
GAAP numbers moved the other way. Earnings per share fell to $1.42 from $2.67 a year earlier, even as adjusted operating earnings rose to $2.55. Part of that gap traces to a bigger share count after the Calpine acquisition, with average diluted shares outstanding climbing to 360 million from 314 million. The nuclear fleet had a rougher quarter too: output slipped to 44,160 gigawatt-hours from 45,170, and the capacity factor at plants Constellation operates fell to 93.0% from 94.8%, with planned refueling outage days more than doubling to 86 from 41.
There’s also cleanup work left from Calpine. Constellation agreed to sell the 606 megawatt Brazos Valley Energy Center to LS Power for $860 million, the last divestiture regulators required, but the deal still needs Department of Justice approval to close. And as a merchant power seller, Constellation stays exposed to regulatory pushback, including from consumer advocates who argue that connecting data centers directly to nuclear plants lets big tech dodge grid costs that land on residential customers instead.
What The Market Is Pricing In
Hedge fund ownership of Constellation rose to 79 funds last quarter from 76, a modest gain in institutional conviction. Short interest sits at just 3.33% of the float, pointing to little organized skepticism. As of August 7, the stock trades at a forward price-to-earnings ratio of 22.88, a premium that assumes the contract pipeline and the Crane restart both land close to plan. Rising fund ownership paired with light short interest suggests the market isn’t betting against the growth story at that price.
The Bottom Line
Constellation’s quarter shows a company converting existing nuclear assets into decades of contracted demand while absorbing the growing pains of the Calpine integration. The bull case leans on Crane’s restart timeline and the steady drip of long-term contracts like the Walmart deal. The bear case leans on execution, from falling capacity factors to unresolved questions over who pays for data center power.
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