Why Did Centrus Energy Stock Drop Today?

Key Points

• A new round of tariff news from the Trump administration frightened investors Friday.

• Centrus Energy imports uranium for enrichment and resale to nuclear power companies in the U.S.

• Fluor's decision to start selling its NuScale stake may have investors in other nuclear stocks feeling nervous today.

• 10 stocks we like better than Centrus Energy ›

Centrus Energy (NYSEMKT: LEU), a supplier of low-enriched uranium nuclear fuel for nuclear power plants that's also developing the ability to produce high-assay, low-enriched uranium for use in advanced reactors, closed 3.3% lower Friday on what was already a red day for the stock market.

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What's ailing Centrus?

There was no obvious Centrus-specific news behind the day's decline, although a few factors were likely weighing on the stock. First and foremost was the Trump administration's announcement of new tariffs on imports from dozens of countries around the world, and the threat to tighten sanctions on Russia in particular. Centrus' role as an importer of uranium, and Russia's role as a primary source of most uranium for nuclear fuel, puts Centrus in an awkward position here.

Second, Fluor hinted today at plans to start selling shares in its own advanced reactor-building subsidiary, NuScale Power. Investors may take this as a cue that the momentum trading frenzy in nuclear stocks could be nearing an end.

Finally, uranium prices are down about 10% from their recent high hit in late June -- and have stayed down for most of the month of July, a second suggestion that atomic power might not be the next big thing.

Should you sell Centrus stock?

All that said, Centrus doesn't look to me anywhere near as risky as other nuclear stocks. It's got more cash than debt on its balance sheet, is generating positive free cash flow, and is earning decent profits -- $106.5 million over the past year.

While hardly cheap at 35 times earnings, it's also hardly the most expensive nuclear stock in this industry. I expect Centrus shares to recover quickly.

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Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends NuScale Power. The Motley Fool has a disclosure policy.