Wunderlich Securities Comments On Constellation Energy Group After Meeting With Management

Wunderlich Securities had an opportunity to meet with the management of Constellation Energy CEG late last week to review the company's outlook. Management suggested the combination of modestly better than expected retail margins year to date, the potential for improving wholesale prices, and an outlook for an increasing regulated ROE supported their optimism for consolidated results. Management was reluctant to respond to recent M&A speculation. However, Wunderlich believes management is focused on a materially higher stock price. It doubts management has much interest in potentially re-acquiring the 49.9% interest in its nuclear business. Wunderlich is maintaining its EPS estimates, Buy rating, and $36 price target. Wunderlich's discussions with CEG management focused on the unregulated retail business. The company remains confident in its earnings outlook for 2011, 2012 and 2013. CEG has consolidated EPS guidance of $3.10-$3.40 for 2011, $2.40-$2.70 for 2012, and over $3.00 for 2013. Earnings in 2012 are negatively impacted by the roll-off of higher hedges for generation output. Wunderlich's earnings estimates are unchanged at $3.25, $2.40 and $3.00 per share for 2011, 2012 and 2013, respectively. CEG closed Friday at $33.09