On Monday, UBS has adjusted its outlook on Constellation Energy (NASDAQ:CEG), raising the stock's price target significantly to $201 from the previous figure of $151, while sustaining a Buy rating on the shares. The revision follows Constellation Energy's recent disclosure of fourth quarter and full-year 2023 earnings, which surpassed consensus expectations.
Constellation Energy provided investors with a comprehensive business and earnings forecast, marking a shift in the company's financial reporting. Instead of focusing on adjusted EBITDA, the firm will now offer guidance based on adjusted EPS, a change attributed to the accounting practices associated with nuclear production tax credits ( PTC (NASDAQ:PTC)).
The company has issued "base EPS" guidance figures for the upcoming two years, projecting earnings per share to be between $5.45 and $5.55 for 2024 and between $6.35 and $6.45 for 2025. The base EPS includes expected revenues from nuclear generation, either under state programs like the Illinois CMC or through the nuclear PTC, as well as capacity revenues for megawatts cleared in PJM and NEPOOL markets. Additionally, it encompasses non-nuclear generation at historical power purchase agreement or market clearing prices, retail volumes for power and natural gas at historical 13-year margins, and other commercial margin sources.
Beyond the base EPS, Constellation Energy anticipates potential additional earnings. The company can reap benefits from margins achieved above the 13-year average on power and natural gas, power prices achieved or hedged above the PTC floor price, and from portfolio optimization strategies. The total adjusted EPS guidance for 2024 is set between $7.23 and $8.03, indicating a positive outlook for the company's financial performance.
The price target increase by UBS reflects confidence in Constellation Energy's ability to navigate the complexities of the energy market and capitalize on its strategic initiatives. The company's recent financial performance and forward-looking guidance suggest a robust business model capable of delivering value to its shareholders.
InvestingPro Insights
Following UBS's upgraded price target for Constellation Energy (NASDAQ:CEG), InvestingPro data reveals a nuanced picture of the company's financial health and market position. With a significant market capitalization of $53.83 billion, Constellation Energy stands as a substantial player in the energy sector. The company's P/E ratio, at 32.26, reflects investor confidence in its earnings potential, although this ratio is higher than the industry average, suggesting a premium on the stock.
InvestingPro's real-time metrics indicate a solid revenue base, with the last twelve months as of Q4 2023 showing revenue of $24.92 billion, and a gross profit of $3.33 billion, leading to a gross profit margin of 13.38%. While the revenue growth for the same period was modest at 1.96%, the quarterly comparison shows a sharper decline of -20.96%, signaling potential volatility or seasonal effects on the company's earnings.
InvestingPro Tips highlight the company's robust dividend growth of 150.0% and a notable one-year price total return of 117.08%, underscoring Constellation Energy's appeal to both income and growth-focused investors. The company's next earnings date is scheduled for May 9, 2024, which will provide further insights into its performance and strategic direction.
To delve deeper into Constellation Energy's market potential and for more InvestingPro Tips, readers can consider subscribing to InvestingPro. Use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. There are 15 additional tips listed in InvestingPro that could offer further investment guidance and market analysis.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.