Shares of Centrus Energy Corp. LEU rose 5% yesterday following the announcement that its subsidiary, American Centrifuge Operating, LLC ("ACO") has secured an award from the U.S Department of Energy (DOE) to expand commercial production of Low-Enriched Uranium (LEU). This marks Centrus’ third win under DOE's Nuclear Fuel Supply Program this year.
This reinforces Centrus’ alignment with the U.S. government’s goal to reduce reliance on Russian imports, build a resilient fuel supply chain for the U.S. nuclear industry and reclaim America’s nuclear fuel leadership.
Highlights of Centrus’ Awards From DOE
Award for LEU Production: ACO is one of the six awardees chosen by the DOE for LEU production. Contract values range from a minimum of $2 million to a maximum of $3.4 billion for all awardees over a 10-year period. The final amount of this award and the potential scale of the expansion will depend upon task orders that will be subsequently issued by the DOE to Centrus.
Award to Deconvert High-Assay, Low-Enriched Uranium (HALEU): On Oct. 8, 2024, ACO won an award from the DOE to support the deployment of technology and equipment to deconvert HALEU from uranium hexafluoride (UF6) to uranium oxide and/or uranium metal forms. This is a crucial step in the nuclear fuel production process. ACO was one of six awardees for deconversion, with the contract value ranging from $2 million to a maximum of $800 million for all awardees .
HALEU Production Award: On Oct. 17, Centrus announced that ACO had won an award from the DOE to expand domestic commercial production of HALEU. It was one of four awardees. The contract value potential ranged from a minimum of $2 million to $2.7 billion for all the companies over a 10-year period.
LEU’s Efforts to Boost Capacity to Meet Demand
Last month, Centrus announced the resumption of centrifuge manufacturing activities and expansion of its manufacturing capacity at its facility in Oak Ridge, TN. The company has earmarked $60 million for the next 18 months to lay the groundwork for large-scale expansion of uranium enrichment at its Centrifuge Plant in Piketon, OH, to meet the rising demand. Centrus, however, stated that an expansion of this magnitude requires a multi-billion dollar public and private investment.
Centrus Bets on Long-Term Demand Prospects for HALEU
Centrus is pioneering the development of HALEU, which is a high-performance nuclear fuel component. HALEU demand is expected to surge in the coming years as it will be used to power both existing reactors and a new generation of advanced reactors. These new HALEU-based fuels bring improved economics and inherent safety features, while also increasing the amount of carbon-free electricity that can be generated.
Per the World Nuclear Association, as of the end of September 2024, there were 67 reactors under construction worldwide, approximately one-half of which were in China. The United States, with more than 90 operating reactors, is the world’s largest market for nuclear fuel.
A Potential Obstacle for LEU Stock
The United States had imposed a ban on Russian uranium imports earlier this year. However, Centrus had obtained a waiver from DOE, which allowed it to import LEU from its Russia-based supplier, TENEX, for delivery to U.S. customers in 2024 and 2025. Centrus filed a second waiver request application to allow for the import of LEU from Russia for processing and re-exporting to its foreign customers. It is currently awaiting DOE's approval. LEU plans to file a third waiver request application to allow for imports for its deliveries in 2026 and 2027.
TENEX’s export license has been rescinded as Russia has banned the export of LEU to the United States or U.S.-registered entities. Per the current mandate, TENEX has to obtain a specific export license to ship LEU to Centrus. If it fails, Centrus may face challenges in fulfilling its delivery commitments to customers, which could affect its results.
Centrus Stock Price Performance
Shares of Centrus have gained 42.1% in the past year compared with the non-ferrous mining industry’s 19.6% growth.
Zacks Investment Research
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LEU’s Zacks Rank & Stocks to Consider
Centrus currently carries a Zacks Rank #5 (Strong Sell).
Some better-ranked stocks from the basic materials space are Carpenter Technology Corporation CRS, Axalta Coating Systems AXTA and DuPont de Nemours, Inc. DD.
CRS beat the Zacks Consensus Estimate in each of the last four quarters, with the average earnings surprise being 14.1%. The consensus estimate for the company’s current fiscal-year earnings is pegged at $6.74 per share, indicating a year-over-year rise of 42%. Its shares have surged 167% in the past year. Carpenter Technology currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for DD’s current-year earnings is pegged at $3.88 per share, indicating a year-over-year rise of 11.5%. DD, which currently carries a Zacks Rank #2 (Buy), beat the consensus estimate in each of the last four quarters, with the average earnings surprise being 12.9%. The company's shares have gained 13.9% in the past year.
Axalta Coating Systems has an average trailing four-quarter earnings surprise of 11.86%. The Zacks Consensus Estimate for AXTA’s 2024 earnings is pegged at $2.15 per share. The estimate indicates year-over-year growth of 37%. AXTA’s shares have gained 13.9% in the last year. AXTA currently carries a Zacks Rank of 2.
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