On Friday, B.Riley maintained a Buy rating on Centrus Energy Corp. (NYSE:LEU) shares and increased its price target to $88.00 from $70.00. The revision follows the announcement that Centrus Energy's subsidiary, American Centrifuge Operating (ACO), has been selected as one of the four awardees by the Department of Energy (DOE) to expand domestic commercial production of high-assay low-enriched uranium (HALEU).
ACO stands to benefit from a DOE award aimed at boosting HALEU production, with contract values ranging from a minimum of $2 million to a maximum of $2.7 billion over a decade. This development is significant for Centrus Energy as it is the sole company holding a Nuclear Regulatory Commission (NRC) license to produce HALEU, which it has already started to do on a small scale.
Moreover, Centrus's status as a U.S.-owned and U.S.-based entity may give it an advantage in securing a substantial portion of the $2.7 billion funding.
The DOE's decision to grant this award comes shortly after a previous HALEU deconversion award on October 8, 2024, which was also given to ACO among five other recipients. B.Riley's increased price target is based on a valuation methodology that remains unchanged but now takes into account the firm's 2025 estimates for Centrus's base business.
The financial firm applies a 12x multiple to its projected 2025 EBITDA, estimating the base business value at $63 per share while attributing an additional $25 per share for the HALEU business. B.Riley anticipates potential long-term gains in the stock price as Centrus Energy capitalizes on its domestic enrichment opportunities for HALEU, as well as low-enriched uranium (LEU) and national security initiatives.
In other recent news, Centrus Energy has been the subject of several major developments. The company's first-quarter 2024 financial results showed total revenue of $43.7 million, a gross profit of $4.3 million, and a net loss of $6.1 million.
Roth/MKM recently downgraded Centrus Energy's stock rating from Buy to Neutral, despite raising its price target for the stock to $62.00 from $55.00. This decision was influenced by the stock's recent price performance and projections of delayed Department of Energy contract awards.
Centrus Energy has secured a contingent supply commitment with Korea Hydro & Nuclear Power, a move aimed at securing $1.8 billion in sales commitments for the expansion of its operations.
Moreover, the company's subsidiary, American Centrifuge Operating, was selected by the U.S. Department of Energy to support the deconversion of High-Assay, Low-Enriched Uranium, with the contract having a minimum value of $2 million.
In regulatory news, the Biden administration is investigating a surge in enriched uranium imports from China, a matter closely watched by Centrus and the broader uranium industry.
The company has also been granted a partial waiver from the U.S. Department of Energy, allowing it to import low-enriched uranium from Russia for deliveries already committed to its U.S. customers for the years 2024 and 2025. These are recent developments that underline the evolving landscape in the nuclear fuel industry.
InvestingPro Insights
Recent InvestingPro data underscores Centrus Energy Corp.'s (NYSE:LEU) strong financial performance, aligning with B.Riley's bullish outlook. The company's revenue growth of 19.37% over the last twelve months, coupled with a remarkable 92.07% quarterly revenue growth, reflects its expanding market presence. This growth trajectory is particularly noteworthy given the recent DOE award for HALEU production.
Centrus Energy's profitability is also impressive, with a gross profit margin of 26.29% and an operating income margin of 21.67% for the last twelve months. These figures suggest efficient operations and cost management, which will be crucial as the company scales up its HALEU production capabilities.
InvestingPro Tips highlight Centrus Energy's strong recent performance, with significant returns over the last week (36.31%), month (103.54%), and three months (84.16%). These metrics align with the positive market reaction to the DOE award announcement and B.Riley's increased price target.
For investors seeking more comprehensive analysis, InvestingPro offers 13 additional tips for Centrus Energy, providing a deeper understanding of the company's financial health and market position.
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