Morning Watchlist: Thursday Edition
A quick note from Behind the Markets
On Tuesday, Google signed one of the largest corporate power deals in history — twenty years of nuclear electricity. And here's the twist worth your coffee: not a single new reactor gets built.
The same day, a $5.8 billion buyer rang the doorbell of the home-healthcare aisle. And after the close, a brewery grew sales 6%, beat on earnings — and got marked down toward a 52-week low anyway.
A renovation, an appraisal, and an overreaction. Three stories this morning. Three pairings. Let's get into it.
1) Google Bought a Renovation, Not a Reactor
Start with what was announced. Google and Constellation Energy unveiled a deal covering 3.6 gigawatts of electricity, the centerpiece a 20-year agreement to buy 890 megawatts of new nuclear capacity for Google's AI data centers. Constellation jumped nearly 15% on the news.
That 890 megawatts — roughly a full new reactor's worth of power — comes from no new reactor at all. Constellation will spend $4.3 billion modernizing eleven reactors it already owns across Illinois, Pennsylvania, and New Jersey: new turbines, new steam generators, new digital control systems. The industry calls these "uprates." The first capacity arrives by 2028.
Why renovate instead of build? Because a new American reactor takes a decade and tens of billions, and the AI power bill is due now. In a city where nobody can get a permit for a new house, the contractor who adds a second story to yours has a line out the door.
The crowd bought Constellation and bid up the small-reactor startups — again. We went looking for who sells the contractor his parts.
The pairing: Curtiss-Wright (CW) — Watch
Curtiss-Wright — descended from the Wright brothers' own company — has supplied the US nuclear fleet since the industry was born: reactor coolant pumps, control electronics, exactly the hardware an uprate replaces. The business is humming. Second-quarter orders hit $1.1 billion, backlog reached $4.5 billion, up 10% since year-end, commercial nuclear sales are growing mid-to-high teens, and management raised full-year guidance to 14–16% earnings growth. Yet the stock, at about $553 Tuesday, sits roughly 31% below its 52-week high of $808, near its low — the whole nuclear aisle has been de-rating since spring. Nine analysts rate it a Buy, average target $786.
So why Watch and not Buy? The aisle's prices. Even marked down, Curtiss-Wright costs about 34 times next year's expected earnings for mid-teens growth. The S&P 500: 21. (And it's the cheap one — the uranium and components names trade north of 40.) The entrance: the late-October report showing uprate-cycle orders actually landing in the backlog, or the markdown deepening through the $522 low, where the premium shrinks toward reason. The honest risks: an AI-capex retrench would cancel the premium power bid overnight — the same watch item we carry at Powell — and both the CEO and CFO hand over their keys at year-end.
2) Private Equity Rang the Doorbell
Tuesday's other headline: McKesson and private-equity firm Clayton Dubilier & Rice agreed to take Option Care Health — America's largest independent home-infusion provider, the nurses who hang IV bags in living rooms — private at $32.05 a share. That's a 37% premium, about $5.8 billion with debt, and the stock jumped 33%. McKesson is putting up $1.4 billion for 49%, with rights to buy the rest later.
Read the buyers' logic. America is aging, hospital beds are the most expensive real estate in medicine, and every payer in the system — Medicare, Medicaid, insurers — saves money when care moves home. A 37% premium is what a sophisticated buyer thinks that migration is worth.
So who else is standing in the hallway they just appraised?
The pairing: Addus HomeCare (ADUS) — Buy
Addus is one of the largest providers of personal care at home — the aides who help seniors with bathing, meals, and daily living, paid mostly by state Medicaid programs. The economics are the pitch: an aide a few hours a day costs the state a fraction of a nursing-home bed, which makes Addus the cheaper option the payer actively wants to buy. It's the rare business whose biggest customer saves money by using it more.
It's a $2.0 billion mid-cap, squarely in our wheelhouse. Revenue is growing 16%, earnings per share grew 26% last year, and it just agreed to buy AccentCare's personal-care division for $275 million. The price, at about $111: roughly 15 times next year's expected earnings. The S&P 500: 21 — and a strategic buyer just paid a 37% premium one shelf over. Fourteen analysts rate it a Buy, average target near $134.
As we said at PayPal, Zimmer, and Bentley: the appraisal is not the thesis. The gray wave is. The honest risks: Medicaid rates are set in state capitols, so one budget fight can reprice a year of work; Bank of America just downgraded the stock on slowing organic growth; and the AccentCare deal adds integration homework. The kill: Medicaid rate cuts outrunning volume growth.
3) Condemned Over Six-Tenths of a Percent
Tuesday night, the other Constellation reported — Constellation Brands, the brewer of Modelo and Corona. Only one Constellation got applause.
The quarter beat: earnings of $3.74 a share against the $3.55 expected, sales up 6% to $2.63 billion. Then came the volume line. Beer "depletions" — industry-speak for cases actually leaving distributors' warehouses for stores, the truest measure of thirst — slipped 0.6%. Modelo fell about 2%, Corona about 5%, and fiscal-year organic sales are now guided between minus 1% and plus 1%. By Wednesday morning the stock had slid to about $110, pennies from its 52-week low — down more than a third from its high.
Keep the score in view. Modelo Especial is still the best-selling beer in America. The company still guides to $11.20–$11.90 in earnings this year. At $110, that's about 9.7 times earnings. The S&P 500: 21. The dividend yields 3.6%, and the average analyst target sits near $162 — more than 40% above the price. A toll bridge where traffic dipped half a percent, priced like the whole bridge washed out.
The pairing: Constellation Brands (STZ) — Buy
The market just graded a 6% revenue quarter as a condemned building. This is the beer-aisle cousin of our Brown-Forman call: a slow year priced as a terminal one.
Now the honest flags, and there are real ones. Berkshire Hathaway bought this stock near $158 — and sold out this summer. The most famous value shop on Earth took the loss and left. The core Hispanic consumer, Modelo's base, is under genuine economic pressure. GLP-1 drugs and the moderation wave are secular, not cyclical. And management's own guide assumes volumes roughly flatten — not recover. The kill: that 0.6% dip steepening into a slide.
Before You Go
This morning before the open, PepsiCo starts the consumer-staples confession — we set our table Monday one aisle behind it with Ingredion at under 9 times earnings. Wednesday afternoon's Fed minutes and the $39 billion 10-year auction also landed, into a 30-year yield that touched 5.70% Wednesday — its highest since 2002; Tradeweb gets paid on the arguing either way. Oil climbed back toward $90 as Houthi attacks hit Saudi airports and a Gulf storm shut in offshore production — the "cheerful loss" we've tracked at Magnolia and Darling keeps refusing to stay lost, and ONEOK is paid per barrel regardless. And one more receipt for Tuesday's Moody's call: SpaceX is reportedly assembling $40 billion of financing to buy Nvidia chips. The AI boom keeps taking out mortgages, and every one of them stops at the notary.
That's the watchlist: a $4.3 billion renovation and the hardware store that supplies it, a 37% appraisal of the house call, and a brewery condemned over six-tenths of a percent. One theme, as always: the best opportunities stand one step behind the headline.
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Written by Behind the Markets