On market opening today the shares of Constellation Energy (NASDAQ:CEG) sank to almost 10% in spite of their strong third quarter report. The company just proved itself to be able to beat analyst estimates however the energy sector as a whole was affected by a recent regulatory decision.
Strong Earnings Report
Constellation Energy’s third quarter report showed its adjusted earnings at $2.74 per share beating market consensus of $2.63 per share. The company also showed improvement in both its generation and load business divisions. Additionally, it is worth bearing in mind that the company had signed a major power purchase contract of 20 years period of time with Microsoft to reactivate the Three Mile Island Unit 1 nuclear power plant.
FERC Decision
But a negative regulatory decision has affected the energy sector. The rejection of Talen Energy (NASDAQ:TLN)’s proposal to increase more power capacity at its Susquehanna nuclear power plant by the Federal Energy Regulatory Commission (FERC) has created uncertainty across the whole sector. The additional power was intended to supply Amazon Web Services data center. The whole sector, including CEG and Vistra (NYSE:VST), was affected by the measure taken by FERC as concerns were raised about the potential regulatory hurdles for similar projects.
Market Reaction
Although the company posted a strong earnings report, the FERC decision created a negative feeling among the investors. People that invest in CEG and Vistra might feel uneasy because the rejection of Talen’s proposal presents a potential hurdle to the detriment of the similar businesses.
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This article first appeared on GuruFocus.
