CEG vs. D: Which Utility Stock Is Charging Up for Stronger Gains?

As demand for clean electricity rises, nuclear energy stocks like Constellation Energy (CEG) and Dominion Energy (D) are gaining attention; CEG operates the largest fleet of nuclear power plants in the U.S. with a Q1 nuclear fleet capacity factor of 94.1%, while D is exploring small modular reactor technology with Amazon. Zacks favors CEG with a Buy rating, citing increased EPS estimates for 2025 and 2026 and a higher ROE of 21.93% compared to D's Hold rating, despite D's higher dividend yield of 4.74%.

Analysis

The increasing demand for clean electricity, driven by factors such as AI-powered data centers, urbanization, industrial growth, rising air conditioner use, and electric vehicle adoption, is highlighting the strategic importance of nuclear energy. Nuclear power offers advantages like a smaller land footprint, systematic waste management, high-capacity factor, zero emissions, and consistent round-the-clock energy supply, unlike intermittent renewables. Constellation Energy (CEG), the largest U.S. nuclear power plant operator, reported a strong Q1 nuclear fleet capacity factor of 94.1%, up from 93.3% year-over-year, indicating robust production. CEG's Zacks Consensus EPS estimates for 2025 and 2026 have risen by 0.75% and 4.54% respectively in the past 60 days, and it boasts a Return on Equity (ROE) of 21.93%. The company plans capital expenditures of nearly $3 billion for 2025 and $3.5 billion for 2026, with 35% for nuclear fuel. In contrast, Dominion Energy (D) is exploring next-generation Small Modular Reactor (SMR) technology, evidenced by a 2024 Memorandum of Understanding with Amazon for potential SMR development in Virginia. However, Dominion's 2025 EPS estimates are unchanged, while 2026 estimates have declined by 0.56% in the past 60 days, and its ROE stands at 9.51%. Dominion plans substantial investments of $10.8 billion in 2025 and $50 billion over 2025-2029 to strengthen renewable operations. While Dominion offers a significantly higher dividend yield of 4.74% compared to CEG's 0.52% and the S&P 500 Composite's 1.27%, Zacks rates CEG as a #2 (Buy) and Dominion as a #3 (Hold), favoring CEG due to its operational strength and positive earnings trajectory.

Key Decisions for Investors

• Investors seeking growth exposure to the nuclear energy sector, driven by robust demand and operational efficiency, may consider Constellation Energy (CEG) given its leading market position, strong capacity factor, positive earnings revisions, and superior ROE.
• While Dominion Energy (D) offers an attractive dividend yield of 4.74% appealing to income-focused investors, its flat to slightly negative earnings outlook and lower ROE compared to CEG suggest a more cautious stance, though its SMR development initiative with Amazon presents a long-term potential upside.
• When evaluating investments in the utility sector, particularly those with nuclear assets, it is crucial to weigh current operational performance and earnings momentum, as reflected in CEG's favorable Zacks Rank, against factors like dividend yield and long-term strategic initiatives such as those pursued by Dominion.