Episode Details

Constellation Energy Corporation (CEG) Q2 2026 — GAAP EPS $1.42, DOWN 47%. Adjusted operating earnings $2.55, UP 33.5% against a ~$2.36 bar. Revenue $7,504M, up 23%, but BELOW a ~$7.83B bar. FY2026 guidance RAISED to $11.50-$12.50. One non-cash line is $0.94 of the $1.13 gap. Two earnings numbers in one filing, pointing opposite ways. GAAP EPS fell 47% to $1.42 while adjusted operating earnings - the basis Constellation guides on - ROSE 33.5% to $2.55. The $1.13 gap reconciles to the penny, and $0.94 of it is one non-cash line: unrealized marks on economic hedges, a $340M loss added back where a year ago the same line was a $121M GAIN. Our model says ~$285 vs $268.03. THE CALL: HOLD (3/5, A BETTER BUSINESS, AND ONLY SIX PERCENT OF UPSIDE) — base-case value ~$285.0 vs ~$268.03 today. KEY METRICS: - THE CALL: HOLD 3/5, fair value ~$285 vs $268.03 (+6%) - not a margin of safety. Street: 20 analysts, 14 Buy / 6 Hold / 0 Sell, $355.20 average (low $296, high $441); we sit BELOW their lowest target. We take Constellation's own 2029 framework, $17.30/sh, at a 21x exit and a 9% discount rate = $285. Bull $360 = the Street's $19.99 at 23x, which lands on their own average - their target IS our bull case. Bear $179. To reach $355 you pay 26.2x the same 2029 number. - THE PRINT: Adjusted operating earnings $2.55 vs $1.91, UP 33.5%, against a ~$2.36 bar - an ~8% beat against the HIGHEST published bar (others carried $2.28-$2.33). In dollars $920M vs $599M, UP 53.6%. GAAP EPS $1.42 vs $2.67, DOWN 47%; net income to shareholders $513M vs $839M. Revenue $7,504M, +23%, but BELOW a ~$7.83B bar. FY2026 guidance RAISED to $11.50-$12.50 from $11.00-$12.00 - both ends up $0.50, a $12.00 midpoint vs ~$11.63 modelled. - THE $1.13 BRIDGE, TO THE PENNY: unrealized fair-value marks +$0.94 (a $340M after-tax LOSS on economic hedges, where a year ago the same line was a $121M GAIN - a $1.32/sh swing nobody earned or spent); acquired commodity-contract amortisation +$0.41 (Calpine purchase accounting, non-cash); Calpine merger/integration +$0.23 (real cash); legal/environmental +$0.10; pension +$0.06; decommissioning -$0.61. Over four trailing quarters GAAP is $10.26 and adjusted $10.63 - 3.6% apart. - IT BEAT INTO ITS HEAVIEST MAINTENANCE QUARTER - ON CAPACITY PRICES. Nuclear output FELL to 44,160 GWh from 45,170; capacity factor 93.0% vs 94.8%; 86 planned refueling outage days vs 41, more than double (outages ran 40% faster than the 38-day industry average). The earnings came from PJM: Eastern Mid-Atlantic capacity $289.67/MW-day vs $125.71 (+130%), ComEd $289.67 vs $109.25 (+165%), PJM West power $51.40/MWh vs $42.43. Illinois ZEC prices collapsed $6.64 to $1.12. - CAPITAL ALLOCATION IS THE CRITICISM; THE CONTRACTS ARE THE BULL CASE. Six-month operating cash flow $1,553M vs $2,521M capex = NEGATIVE $968M free cash flow, while $1,971M went to buybacks funded by $5,001M of new debt; cash fell $3,641M to $697M; goodwill $420M to $11,527M; shares 314M to 360M (+14.6%). Against that: ~920 MW of new 15-20yr nuclear PPAs (18.5yr avg, investment-grade, ~30% of baseload contracted by 2032), Crane cleared by FERC and the NRC for a 2027 restart, Ginna and Nine Mile Point 1 filed to 2049, and a $44.75/MWh PTC floor through 2032. What to watch: UP: PJM capacity clearing near $290/MW-day again, Crane energised on schedule in 2027, or another gigawatt of long-term nuclear PPAs. BEAR: capacity back under $150/MW-day, a 2027 guide below $13.00, or another year of debt-funded buybacks while free cash flow stays negative. Also on YouTube: @ChargedAlpha DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.