1 Nuclear Stock That's Bigger, Better, and Cheaper Than Natural Gas

Source: Exelon Corporation 

Exelon Corporation's (NYSE: EXC  ) stock isn't just near its 52-week low -- it's near an all-time low. This nuclear stock has been left for dead by natural gas investors, but nuclear may be headed for a cost-competitive comeback like never before. Here's why.

Nuclear notions
Exelon Corporation (and Exelon stock) took a major hit as persistently cheap natural gas prices knocked nuclear out of the cost-competitive arena. With 19,000 MW of nuclear spread across 10 plants and 17 reactors, Exelon owns around 20% of our nation's entire nuclear fleet.

That's great news for consistent scale, but the numbers simply haven't added up. Although nuclear has generally fared better than dirty fuels (coal and oil) slapped with expensive new emissions standards, natural gas has put nuclear on the side-line. Nuclear-centric Exelon Corporation and Southern Company (NYSE: SO  ) shares have hit the red in the last year, while natural gas pioneers Dominion Resources (NYSE: D  ) , Spectra Energy Corp. (NYSE: SE  ) , and master limited partnership Spectra Energy Partners (NYSE: SEP  ) have seen shares soar.

EXC Chart

EXC data by YCharts

While not quite on the nuclear scale of Exelon, Southern Company's three nuclear facilities provide around 20% of all electricity used in Alabama and Georgia. Southern Company is also adding on two more units in 2017 and 2018, the first new nuclear facilities to be built in the U.S. in over 30 years.

But old and new nuclear haven't helped Exelon stock or Southern Company stock. Dominion Resources, Spectra Energy Corp., and Spectra Energy Partners are the new apples of investors' eyes for two reasons. First, natural gas transmission projects provide regulated "toll booth" revenue that's about as steady as, well, toll booth revenue. Dominion's got 7,800 miles of pipeline spread around the Marcellus shale area, while Spectra Energy handed off its substantial transmission assets to Spectra Energy Partners in November.

Greg Ebel, president and CEO of both corporations, called the move a "a win for investors in both Spectra Energy and Spectra Energy Partners," and noted that the financial move would allow Spectra to move ahead with $25 billion in growth projects over the next 10 years.

Natural gas or nuclear?
While natural gas has rightly made its way into mainstream markets, nuclear energy stocks may be ready for their comeback. From an all-time low in early 2012, natural gas prices have headed steadily higher. And even as companies like Dominion Resources and Spectra Energy prepare for new sales from natural gas exports, international demand will drive up prices even further.

Henry Hub Natural Gas Spot Price Chart

Henry Hub Natural Gas Spot Price data by YCharts

That's good news for nuclear companies like Exelon Corporation and Southern Company. Although strategic hedges have helped some utilities weather the natural gas storm, Exelon has been openly rooting for LNG exports to help stabilize natural gas prices.

Source: Exelon Q3 2013 earnings presentation 

And although energy price movements are notoriously hard to predict, Exelon's valuation provides plenty of upside that a "priced-for-perfection" natural gas pick like Dominion Resources simply can't offer at the moment:

Company

P/E Ratio

Price-to-Book

Exelon Corporation

15.0

1.10

Southern Company

21.9

1.89

Dominion Resources

60.4

3.27

Spectra Energy Corp.

21.9

2.48

Spectra Energy Partners

23.8

2.25

Source: Yahoo! Finance

Exelon is a solid company with good valuation and an increasingly competitive business model. With Exelon stock near its lowest price ever, it may be high time to turn a blind eye to natural gas and give nuclear another go.

The Next Big Winner
Exelon stock is set to make a comeback in 2014-and it's not the only one. The market stormed out to huge gains across 2013, leaving investors on the sidelines burned. However, opportunistic investors can still find huge winners. The Motley Fool's chief investment officer has just hand-picked one such opportunity in our new report: "The Motley Fool's Top Stock for 2014." To find out which stock it is and read our in-depth report, simply click here. It's free!


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  • Report this Comment On December 19, 2013, at 6:50 PM, Spider8r wrote:

    NG price is going up but so will Uranium, so hedge any EXC with CCJ (plus its like getting part of a nuclear plan free!)

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