Nuclear energy is enjoying a revival, as multiple countries look to nuclear power to help fuel their future. In the United States, President Donald Trump has set an ambitious goal to quadruple the country's nuclear energy capacity by 2050. Not only are there strong tailwinds from demand, but supplies are also tightening due to geopolitical risk, as Russia is a major uranium supplier.
Nuclear stocks have surged over the past year but have recently pulled back amid recent market volatility, creating an opportunity to buy Cameco (CCJ +0.98%) and Centrus Energy (LEU +7.40%) in February. Here's what investors need to know.
Image source: Getty Images.
Cameco is a high-grade North American uranium miner
Cameco is a North American-based uranium miner with high-grade mines, MacArthur River and Cigar Lake, which account for a large share of the world's high-quality uranium supply. The company also holds a stake in the Inkai joint venture in Kazakhstan and provides refining and fuel manufacturing services.
NYSE: CCJ
Key Data Points
The stock has surged, trading up 395% since the start of 2023. The company stands to benefit from rising demand as countries look to triple their nuclear energy capacity by 2050. Not only that, but in May 2024, following Russia's invasion of Ukraine, President Joe Biden signed the "Prohibiting Russian Uranium Imports Act." While some companies have waivers to purchase uranium if there are no viable alternatives, these waivers will expire on Jan. 1, 2028.
The combination of these two factors could bode well for Cameco. The company is headquartered in Canada and could be a key supplier for North American customers. Not only that, but it also has a 49% stake in Westinghouse, which provides services to nuclear plants and new-build technologies, such as the AP1000 reactor. Last year, the U.S. government committed $80 billion to building nuclear reactors in a joint agreement with Cameco, Westinghouse, and Brookfield Renewable Partners (which owns the other 51%).
Centrus Energy provides enriched uranium and seeks domestic processing capabilities
Centrus Energy provides nuclear fuel components for utilities' nuclear reactors, including low-enriched uranium (LEU) and natural uranium hexafluoride, which is used to produce LEU.
NYSE: LEU
Key Data Points
The company currently sources its uranium from global suppliers, including from Orano in France and TENEX in Russia. While Centrus currently has a waiver to import LEU, there is an urgent need to replace Russia's sourced enriched uranium, which accounts for approximately one-quarter of U.S. imports.
Centrus Energy was awarded a $900 million task order from the Department of Energy to expand its uranium enrichment capacity at its Piketon, Ohio, plant. The company aims to enrich uranium domestically, producing both LEU and high-assay low-enriched uranium (HALEU), which is used in advanced reactors designed by companies like TerraPower, Westinghouse Electric, and Oklo. It is currently the only producer of HALEU for both commercial and national security applications licensed by the Nuclear Regulatory Commission.
Both Cameco and Centrus Energy trade at expensive valuations at 74 times and 66 times their projected 2026 earnings, respectively, making them vulnerable to large price swings. However, if you are bullish on the long-term nuclear energy buildout, I think these are two stocks worth holding for the next decade and beyond.
