Nooculer power is a big topic this week. Our president, to whom we owe today's incorrect phonetics, has been stumping for new plants as a way of trying to free the country from the grip of oil, gas, and coal-fired electrical power.
Given Americans' notable NIMBY (Not In My Back Yard)-ism, I won't be holding my breath until new reactors are built. But one company that stands to profit from those already in use is Ceradyne (NASDAQ:CRDN), a ceramics specialist best known for its armor plating for soldiers.
Today's announcement looks like the first order to come to the firm's newest business segment, but longtime Ceradyne followers are probably familiar with the story already.
As CEO Joel Moskowitz has often said during conference calls, the company's boron carbide product -- the key ingredient in those ceramic plates -- also has the ability to absorb neutrons, making it potentially attractive as transportation and storage container material for stuff that spits neutrons, like nuclear rods. That is, if it can be incorporated into materials and forms that have the physical characteristics to get the job done. (Obviously, no one wants spent nuke fuel rattling around in something as brittle as a teacup.)
Just a few months back, the company announced a partnership with Canadian aluminum giant Alcan (NYSE:AL) and the purchase of a fabrication facility in Canada destined for the manufacture of a new class of hybrid materials, a boron-carbide/aluminum composite it calls a metal-matrix composite (MMC).
Today's news indicates that the MMC material has passed a first milestone. Transnuclear has ordered components to incorporate into its NUHOMS storage systems. The total revenue for this order -- $1.5 million -- isn't much of an add to Ceradyne's trailing-12-month sales of $500 million. But it could be an indicator of a material new source of sales coming online in the near future.
Transnuclear is, according to its website, the largest supplier of spent fuel storage systems in the United States. Transnuclear's parent company, Areva Group, is an integrated French nuclear giant that did about $13 billion in revenues last year. Of that, roughly 20% was owed to the "back end" segment, where storage systems like this fit in. If Ceradyne can get a foothold in that biz, it could be big, since the French are as enthusiastic about nukes as they are about Jerry Lewis.
Personally, I'm more excited about the oilfield opportunities Ceradyne may have with big producers such as ExxonMobil (NYSE:XOM), Total (NYSE:TOT), or Royal Dutch/Shell (NYSE:RDS-a); that is, if the double-super-secret-drilling-environment product that's reportedly in testing proves to become a must-have technology.
As a Ceradyne shareholder, I'll take all the energy-related business I can get. Ceradyne's putting together a solar-industry supply biz in China as well. And that's why I don't suffer the same jitters that others seem to have regarding this company.
While I don't believe the demand for body armor is as volatile as it's often perceived to be, I'm a lot more confident in the demand for energy. If Ceradyne can position itself as a key supplier to the oil, nuclear, and solar segments, I think investors would reap richer rewards down the line.
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At the time of publication, Seth Jayson had shares of Ceradyne, but no positions in any other stock mentioned. View his stock holdings and Fool profile here. See what he's Digging these days. Fool rules are here.
