Posts for Ticker ‘USEC’

USEC: Rising Costs Making A Nuclear Winter (USU)

USEC Inc. (NYSE: USU) is one of more widely followed stocks that is in the group of companies et to benefit from the coming nuclear power surge in the coming years.  There is just one problem, well two.  The first problem is that this has already fallen some 60% from major highs over the last year.

But the second problem is earnings and future expenses.  The U.S. uranium enrichment company disclosed that its plan to build the second uranium enrichment facility on Piketown, Ohio to supply fuel to nuclear energy reactors could run about 50% over budget. It is starting to sound like a familiar reason: pricing pressure on labor, commodities, and construction materials like steel and aluminum is rising much higher than anticipated. 

Early last year it forecast a $2.3 Billion cost, but now it is forecast at $3.5 Billion. USEC is trying to take steps to transfer the American Centrifuge technology to strategic suppliers to build the machines and the balance of plant infrastructure.

Shares were up 3.9% to $9.25 today, but shares are down some 19% at $7.50 today in after-hours trading and the 52-week trading range is $6.95 to $25.65.

Jon C. Ogg
February 25, 2008

Posted on: February 25, 2008 – 6:18 pm in Nuclear, , ,

As Media Touts Nuclear Power, Time To Review Nuclear & Uranium Stocks (CCJ, USU, SGE, FLR, GE, URRE, USEG, URZ, CAU, MOS, CF, NLR)

It seems like the media is touting and flaunting more and more for a return of nuclear energy.  This may or may not happen as the applications are again for "Next Year" and it is with no surprise that it’s becoming the topic of much labor in Mexico pronounced "Man-ya-na" (sorry no N~ without changing languages).    You can also see where spot Uranium prices have come down significantly from the pre-summer ramp and summer highs.  TradeTech’s Uranium site shows its price chart for Uranium and The Ux Consulting Company shows much of the same.  But with $80.00 per barrel of oil and T. Boone Pickens calling for even higher oil prices you never know just how long the "call for nuclear power" will take to resurface from the investment community.  Nuclear power is getting more media coverage again. 

Let’s assume for a moment that we forget about the discussions leading to delays that have been perpetual.  Let’s for get about the political side of nuclear power.  Lets forget about killing land under mountains where we’ll bury the stuff in Nevada.  And let’s forget about the potential environmental catastrophe that can result if something goes horribly wrong.

There are many stock plays in the U.S. alone that will be huge beneficiaries of this if even one nuclear power plant approval goes through.  If there is one, why not the full dozen of them.  Here is the lot of companies:

Shaw Group (NYSE:SGR) is perhaps the most vertical of the engineering and construction firms.  Fluor (NYSE:FLR) is also in there.  And we can’t leave out the monster General Electric (NYSE:GE) for new reactors, nuclear fuel, reactor services and performance services.

Cameco (NYSE:CCJ) out of Canada is THE go-to behemoth in the stock market for Uranium miners and producers.  The much smaller company in the US is USEC (NYSE:USU), although its shares were hit exceptionally hard Friday after testing started.  Some more smaller and much more speculative stocks in the sector are Uranium Resources, Inc. (NASDAQ:URRE), U.S. Energy Corp. (NASDAQ:USEG), Uranerz Energy Corp (AMEX:URZ), and even Canyon Resources Corporation (AMEX:CAU).  Mosaic (NYSE:MOS) and CF Industries (NYSE:CF) are stealth plays in the sector that can enrich uranium from phosphate, but you should know that prices have to be very high and have to be expected to remain very high for quite some time for those to be cost effective.

 

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Posted on: September 14, 2007 – 12:32 pm in Nuclear, , , , , , , , , , , , , , , , , , ,

Cameco: Playing Pinocchio or Pangloss (CCJ)

Cameco Corp. (NYSE:CCJ) did something interesting, and it’s a move that most companies do when they aren’t happy about a reaction to a news release.  This morning the company issued earnings at $0.55 EPS, well above consensus estimates.  But the Uranium producer’s guidance was deemed under plan for 2007.  The problem with this is that the company apparently did not believe that its guidance was going to be received in this manner. Then tonight came the ‘clarification press release.’

If the company thought it was going to have a positive reception to the news, then it wouldn’t have made a clarification press release tonight. 

.….While future sales levels were reduced in our assumptions about forecast realized prices, this is not expected to significantly impact our profitability….. During the call, the company provided some background information regarding the updated sales volume assumption for the 2007 to 2017 period. The sales volume assumption in the 2007 first quarter report was 35 million pounds per year for 2008 to 2017. In our 2007 second quarter report, the sales volume assumption was reduced to 30 million pounds per year to eliminate the influence of near-term spot market purchases and subsequent resale…….

You can read the press release here on the next page break for the full data.  The problem with ‘clarifications’ such as this is that it is often symptomatic of ‘corporate communications.’  I fear that this may be taking hold as a culture in Cameco and this is the major Uranium stock play.  I have listended in on the conference calls regarding the Cigar Lake flooding SNAFU, and it just seems from an outsider’s point of view that the company either isn’t doing enough of the right things or that the company has lost control of being able to communicate its message.  The call-in questions and ‘criticisms’ seem to be escalating in tone from the sound of it, and a falling stock price won’t curb that. 

Selling product into the future at fixed and locked-in prices is quite normal.  Making production guestimates is quite normal.  Even making commodity market price assumptions is somewhat normal.  But sometimes it goes wrong.  This stock is closer to its yearly low, but the truth is that this would still easily be considered in the middle part of its 52-week trading range.  The problem regardless of the last year is that the company has seen shares slide from $55 (U.S.) down to the $40 area most recently over the last 45 days. 

Clarification press releases are needed sometimes, but it makes you feel sometimes like the company is trying to do what kids do in games.  "DO OVER!"  This company is the largest play on the Uranium market, and with thousands of shareholders and a hot market for its key commodity it would be in the company’s (and its shareholders’) best interest to communicate better or be in a bit better control than it has been.

The excitement has left this one too because of delays from its flooding of its Uranium project at Cigar Lake: In early July, Cameco announced that the startup of Cigar Lake production could be delayed from 2010 to 2011.  Shares were indicated higher and the ‘clarification’ may help shares onTuesday.  It is just not that frequent that a company worth more than$10 Billion has to make clarifications.

Please see the NOTES REFERENCED ON PAGE 2 at the bottom here showing the descriptions of all of its giuidance remarks from the press release.

Jon C. Ogg
July 30, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

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Posted on: July 30, 2007 – 10:18 pm in Alternative Energy, Earnings, Earnings Warning, Nuclear, , , , ,