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Down 19% YTD, Is This Small-Cap Uranium Stock a Buy Now?
Maryland-based nuclear energy supplier Centrus Energy Crop. (LEU) supplies nuclear fuel components and services for the nuclear power industry. It operates through two segments: Low-Enriched Uranium (LEU) and Technical Solutions.
Through its Low-Enriched Uranium segment, it sells separative work units (SWU) components of natural uranium hexafluoride, uranium concentrates, and enriched uranium products to power nuclear power plants. Its technical solutions segment oversees the technical, manufacturing, engineering, and operations of its public and private customers.
Valued at $667 million by market cap, LEU stock is down 19.4% YTD - considerably lagging the broader Russell 2000 Index (RUT). But ahead of the small-cap uranium stock's Aug. 6 earnings report, is this a good buying opportunity for investors?
Centers Posts Disappointing Q1 Results
The nuclear fuel company posted poorly received results for the first quarter of 2024, as both revenue and earnings fell short of estimates.
LEU's revenue fell drastically to $43.7 million from $66.9 million a year ago, and the results also fell short of analysts' $76.9 million estimate. Centrus also posted a record loss of $6.1 million, reversing the prior year's profit of $7.2 million, and falling well short of Wall Street’s $9.5 million expectations. Gross profit collapsed from $23 million last year to just $4.3 million.
On a per-share basis, that translated into a loss of $0.38, compared to the average analyst forecast for a profit of $0.60.
However, Centrus maintained a strong cash position at $209.3 million, and said it anticipates having enough liquidity to fund operations for 12 months.
Ahead of the Aug. 6 report, Wall Street is looking for a profit of $0.78 per share on $86.83 million in revenue.
Relief for Centrus
As noted in LEU's first-quarter release, the U.S. government previously imposed a ban on uranium imports from Russia, which would require the company to apply for a waiver to continue importing low-enriched uranium to meet existing supply contracts. The new sanctions were approved by the Senate in May as part of a broader clampdown aimed at disrupting Russia's funding for its ongoing war with Ukraine.
Earlier this month, officials granted Centrus Energy a waiver on the import ban for this year and the next. The Department of Energy (DOE) said that the waiver was “to ensure there are no disruptions to the operation of US reactors as a result of the ban,” but deferred on waiver decisions for 2026 and 2027.
Per the DOE, the waiver process “allows time to build up a strong US capacity to supply the necessary LEU for the domestic market."
What's the Analyst Forecast for Centrus?
Wall Street is very optimistic about Centrus stock, as evidenced by the consensus “Strong Buy” rating with a mean price target of $66.00 - which indicates expected potential upside of 51% from current price levels.
Although there are currently only 3 analysts covering this small-cap stock, it's still worth noting that all three have a “Strong Buy” rating on Centrus Energy. While there's some very real regulatory risk involved with this nuclear energy pick, there's also significant upside potential for investors who can stomach the volatility.
On the date of publication, Ruchi Gupta did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
