Constellation Energy Group Inc. (CEG) reached a comprehensive agreement with Toyota Motor Corporation’s (TM) subsidiary Toyota Motor Engineering & Manufacturing, North America Inc. Per the agreement, Constellation Energy will provide integrated natural gas services and energy market analysis to Toyota facilities in the U.S., Canada and Mexico.
Constellation Energy’s services to Toyota would include natural gas supply, risk management, hedging and budget analysis, energy market monitoring, utility rate, invoice and pipeline transportation reporting, and monitoring relevant regulatory and legislative issues.
The Toyota facilities where Constellation Energy would provide the services include U.S. manufacturing facilities in Alabama, Indiana, Kentucky, Missouri, Tennessee, West Virginia, Texas and Mississippi; the Toyota Technical Center in Ann Arbor, Michigan; Toyota Manufacturing Canada, Inc, in Cambridge and Woodstock; and Toyota Manufacturing de Baja California, Mexico.
Based in Baltimore, Maryland, Constellation Energy supplies energy products and services in North America. The company operates in three segments: Merchant Energy, Regulated Electric and Regulated Gas.
Constellation Energy remains diversified among owned generation, contractual generation, regulated distribution and competitive supply of energy. Its diverse fleet of power generating units located across the U.S. and Canada is a mix of coal, oil, natural gas and renewable sources (including geothermal, solar, hydro-electric and biomass). Diversified generation assets help Constellation Energy minimize the impact of volatile commodity prices on its input costs.
However, we believe that the above positives have already been reflected in the current valuation of Constellation Energy, leaving little room for above-market gains. Also, in the near term, the fortunes of the company appear a little bleak due to a tepid Maryland economy, risks in the merchant power space, pending regulatory cases and a low-dividend yield, which continue to restrain valuation in the near term.
We have a Zacks #3 Rank (short-term Hold recommendation) on Constellation Energy shares. This implies that the stock is expected to perform in line with the broader U.S. equity market over the next 1–3 months. Our long-term ‘Neutral’ rating on Constellation Energy also supports this view, suggesting investors against taking any position on the stock for the time being.
A window of opportunity however is offered by its Zacks #1 Rank (short-term Strong Buy recommendation) peers like Huaneng Power International Inc. (HNP) and TransAlta Corporation (TAC).
CONSTELLATN EGY (CEG): Free Stock Analysis Report
HUANENG POWER (HNP): Free Stock Analysis Report
TRANSALTA CORP (TAC): Free Stock Analysis Report
TOYOTA MOTOR CP (TM): Free Stock Analysis Report
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