CEG vs. AEP: Which Utility Is Best Positioned for Long-Term Growth?

The need for clean electricity is rising sharply due to a number of factors, including the development of enormous artificial intelligence-powered data centers, urbanization, industrial growth, rising global temperatures that increase the need for air conditioners, and the growing popularity of electric vehicles.

Compared to other clean energy sources, nuclear power plants require significantly less land to generate the same amount of electricity. While all conventional energy sources produce waste during electricity generation, nuclear energy stands out as the only one that systematically manages and safely stores its waste.

Nuclear power plants are known for their high-capacity factor, which means that they can operate at or near their maximum output for a long time. Nuclear power provides carbon-free electricity and a continuous power supply, even in extreme weather conditions. Production tax credits are also advantageous for nuclear energy because they help offset the high upfront costs of constructing nuclear power plants, making them more competitive than alternative energy sources. 

With this increasing importance, utility stocks like Constellation Energy Corporation CEG and American Electric Power AEP are becoming attractive investment options.

The Case for CEG Stock

Constellation Energy is the largest nuclear power operator in the United States, with a significant portfolio of nuclear power plants. Altogether, CEG generates 10% of the nation’s carbon-free energy. Its fleet of nuclear, hydro, wind, and solar generation facilities produces enough energy to power more than 16 million homes and businesses through more than 32,400 megawatts (MW) of capacity and an annual output that is nearly 90% carbon-free.

Constellation Energy owns and operates 12 nuclear facilities with the capacity to generate approximately 22,000 MW of electricity. The company can meet the growing demand from power-intensive industries like data centers, thanks to its strong nuclear infrastructure.

The Case for AEP Stock

American Electric Power owns and operates the Donald C. Cook Nuclear Plant in Michigan, which has two reactors. AEP, through its ownership in Georgia Power, has a stake in the construction and operation of Vogtle Units 3 and 4. These are the newest reactors in the United States and part of an expansion project at the plant. American Electric Power is involved in the development and potential deployment of Small Modular Reactors (“SMRs”), which are smaller and more flexible nuclear reactors. The company is exploring SMRs as a future energy resource to meet growing energy demands. 

American Electric Power anticipates new loads to come online in the next three years, buoyed by growing economic development and an increasing number of data centers. AEP has been making significant investments to strengthen its grid to meet the growing electricity demand. 

Let's compare the two stocks' fundamentals to find out which one is a better investment pick at present.

How Do Zacks Estimates Compare for CEG & AEP?

The Zacks Consensus Estimate for Constellation Energy’s 2025 and 2026 earnings per share (EPS) has remained unchanged for 2025 and increased 0.87% for 2026 in the past 60 days.
 

The Zacks Consensus Estimate for American Electric Power’s EPS for 2025 and 2026 has increased 0.17% and 0.32%, respectively, in the past 60 days.

CEG & AEP’s Long-term Strategic Investment Plans

Constellation Energy’s strategic investment plans and focus on expanding its renewable portfolio drive its earnings performance. The company expects capital expenditures of nearly $3 billion and $3.5 billion for 2025 and 2026, respectively. Nearly 35% of projected capital expenditures are for the acquisition of nuclear fuel, which includes additional nuclear fuel to increase inventory levels.

American Electric Power currently plans to invest $54 billion over the 2025-2029 period. It aims to invest approximately $25.4 billion in its transmission and distribution business during the same period. Nearly $0.5 billion of investment is planned for nuclear generation. Such hefty investments should enable American Electric Power to achieve its long-term earnings growth target of 6-8%.

CEG & AEP’s Return on Equity (ROE)

ROE measures how efficiently a company is utilizing its shareholders’ funds to generate profits. Constellation Energy’s current ROE is 21.93% compared with American Electric Power’s 11.68%.

CEG & AEP’s Dividend Yield

Utility companies generally distribute dividends and increase shareholders’ value. Currently, the dividend yield for Constellation Energy is 0.48% compared with the Zacks S&P 500 Composite’s average of 1.17%, and the same for American Electric Power is 3.41%.

CEG or AEP: Which Is a Better Choice Now?

Constellation Energy's substantial nuclear capacity, efficient operations, and consistent production enable it to fulfill the increasing demand from data centers. American Electric Power is involved in the development and potential deployment of SMRs as a future energy resource to meet growing energy demands.

Both stocks have a lot of potential in the energy sector and can provide investors with significant growth opportunities.

However, our choice at the moment is American Electric Power, given its better earnings growth and dividend yield. Both CEG and AEP stocks carry a Zacks Rank #3 (Hold) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

 

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This article originally published on Zacks Investment Research (zacks.com).

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