Constellation Energy (CEG 0.44%) stock dominated headlines in 2024 with its announcement of a plan to reopen Three Mile Island and supply nuclear power to Microsoft server farms. Constellation is starting off 2025 with even more news -- and even more share price strength. This morning, the electric utility announced plans to acquire natural gas and geothermal electric utility Calpine Corporation.

Investors applauded the move. As of 12:15 p.m. ET, Constellation stock is up 22.5%.

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NASDAQ: CEG

Constellation Energy

Today's Change

(-0.44%) $-1.14

Current Price

$256.43

Key Data Points

Market Cap

$92BMarket cap calculated using publicly traded shares outstanding only. Does not include unlisted, private, or dual-class non-traded shares. Implied market cap may vary.

Day's Range

$255.18 - $266.00

52wk Range

$228.63 - $412.70

Volume

3.2M

Avg Vol

3.7M

Gross Margin

13.18%

Dividend Yield

0.63%

The Constellation-Calpine merger

Constellation says that after merging with Calpine, it will be the biggest electric utility in America, with 2.5 million customers, and also the nation's largest clean energy provider.

Constellation plans to pay $16.4 billion for privately held Calpine, transferring 50 million Constellation shares and paying $4.5 billion in cash, plus assuming $12.7 billion of Calpine debt. Thanks to the surge in Constellation's share price post-news, however, the value of this transaction is already growing.

With Constellation shares now costing about $298.50 each, the 50 million share component of the transaction has grown to $14.9 billion in value. Add the cash payment and the assumed debt, and the total value of this transaction now exceeds $32 billion. (Although if you net out the cash Calpine will generate between now and closing, and the value of Calpine's tax loss carryforwards -- worth about $2.5 billion in total -- the value retreats toward $29.5 billion.)

Is Constellation Energy stock a buy?

That's what Constellation is paying. Now here's what it will get: 20% operating earnings growth by 2026 (which implies operating profit of about $10.82 per share that year), and $2 more per share in net profit in later years than Constellation would have earned without Calpine (so probably $11 per share or more). Plus, Constellation projects "double-digit" earnings growth "through the decade."

That sounds pretty good. Still, at a share price of nearly $300, it works out to a P/E ratio of roughly 27.

Call me a skeptic, but that sounds like a lot to pay for an electric company.