Centrus Energy (LEU), currently a Zacks Rank #5 (Strong Sell), is a U.S.-based provider of nuclear fuel and related services. The company supports the global nuclear power industry by enriching uranium for use in commercial reactors, enabling utilities to produce steady, carbon-free electricity.
The stock has had a monster bull run since April, moving from the $50 level to $250. This was sparked by a strong Q1 earnings report and a federal funding tailwind. However, the company reports earnings next week and investors might want to get cautious ahead of the report.
About the Company
Centrus Energy operates through two primary segments: Low-Enriched Uranium (LEU) and Technical Solutions. The LEU segment provides key components of nuclear fuel, while the Technical Solutions segment supports both government and private sector clients by offering a range of services.
Centrus has a long history tied to the U.S. government's nuclear program and one of its flagship efforts is deploying advanced centrifuge technology to produce High-Assay Low-Enriched Uranium (HALEU), a next-generation fuel required for many advanced nuclear reactors currently in development.
LEU is uniquely positioned as the only U.S.-owned company actively working to domestically produce HALEU at scale, something that has become increasingly important as policymakers seek to reduce reliance on Russian-supplied nuclear fuel.
The stock has run significantly higher over the last three months and now has a market cap of $4B. The stock holds Zacks Style Scores of “A” in Growth, but “F” in Value.
Q1 Earnings Beat
Back in May, the company reported a massive 1010% EPS beat. Revenue rose sharply to $73.1 million from $43.7 million a year ago, marking a 67% year-over-year increase and exceeding expectations of $65.5 million.
The company attributed the strong results to continued operational performance and growing demand for domestic nuclear fuel production, which has become a national priority.
Management emphasized $3.4 billion in federal funding now committed to rebuilding the domestic nuclear fuel cycle, Centrus sees itself as a key player in meeting both energy and national security needs. The company highlighted its reliable enrichment operations and consistent project execution, while noting its $3.8 billion contract backlog through 2040 as a strong foundation for long-term growth.
The quarter started off the bull run, but news out of Washington helped accelerate the stock higher.
Trump Fuels Nuclear Energy
In late May, and then again in June, the Trump administration enacted a set of executive actions to reduce foreign dependence on nuclear energy and boost U.S. energy supply in support of AI expansion. Both actions were highly bullish for Centrus Energy.
Centrus saw immediate attention from investors and the stock went from $120 to $210 in May and then $170 to $250 from June into July.
Earnings Estimates Falling Ahead of Earnings
While all the excitement is warranted, investors might want to take some profits ahead of earnings.
Looking at earnings estimates from analysts, numbers are falling for the current quarter. Over the last 90-days, there has been a 16% drop, going from $0.85 to $0.71.
While next quarter and the current year still look good, analysts have also pulled back on next year, with numbers dropping from $3.02 just 90 days ago to $2.81.
Technical Take
LEU has gone parabolic so it’s not a good sign to see the fundamental story weakening. The stock recently has hit $250 and dropped about 5%, so investors look like they might be taking profits before that earnings report.
The question is where it might go after the earnings release. The risk is a disappointment on EPS, with the stock testing some moving averages below.
The 21-day MA is $210, but the 50-day is down at $170 and the 200-day MA is way down at $103.
So if we get a setback, the stock could see a big drawdown. Investors should weigh their risk-reward as we move forward.
In Summary
Despite Centrus Energy’s impressive run and strong positioning in a strategically important sector, the recent pullback and declining earnings estimates suggest caution may be warranted.
With the stock having more than quadrupled in just a few months, expectations are high going into the upcoming earnings report, any misstep could trigger a sharp reversal.
For now, investors may want to consider locking in gains or reducing exposure and look to Coeur Mining (CDE). The stock is a Zacks Rank #1 (Strong Buy) that is consolidating near recent highs.
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Centrus Energy Corp. (LEU): Free Stock Analysis Report Coeur Mining, Inc. (CDE): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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