Fulfilling a campaign promise, President Donald Trump signed executive orders (yes, plural) this afternoon “to jumpstart the nuclear energy industry by easing the regulatory process on approvals for new reactors and strengthening fuel supply chains,” Reuters reports.
Reuters broke the story last night, and Fox news has just confirmed that the orders are now out. Investors didn’t even wait for confirmation before beginning to buy nuclear stocks, however, and shares of nuclear power plant construction company Fluor Corp. (FLR 9.26%) is already up 8.8% through 2:10 p.m. ET. Uranium miner Denison Mines (DNN 11.00%) is doing even better, up 10%, and Centrus Energy Corporation (LEU 23.40%), which enriches uranium for use as nuclear fuel, is doing best of all, up a staggering 22.1%.
Image source: Getty Images.
How President Trump jolted nuclear stocks today
As Fox reports, one executive order aims to reform nuclear research and development efforts at the Department of Energy, accelerate reactor testing, and develop a pilot program for building new, more modern reactors.
A separate executive order reportedly will facilitate construction of nuclear reactors on federal land. A third will “overhaul” the Nuclear Regulatory Commission (NRC) and accelerate license approvals, such that applications to build a nuclear reactor can be approved within 18 months. And a fourth will encourage uranium mining and uranium enrichment, such as Centrus aims to do, within U.S. borders.
Ultimately, the goal is to expand U.S. nuclear power production fourfold, to 400 gigawatts within 25 years, providing sufficient electrical power to support new artificial intelligence systems that the administration is also promoting. As Defense Secretary Pete Hegseth explained in remarks at the signing:
We’re including artificial intelligence in everything we do. If we don’t, we’re not fast enough. We’re not keeping up with adversaries. You need the energy to fuel it. Nuclear is a huge part of that.
Reporting on the signings, NBC news noted that experts anticipate electricity demand in the U.S. will grow 78% over the next 25 years, largely because of AI. The quadrupling of nuclear capacity will go a long way to covering that increase in demand.
Which nuclear power stock should you buy?
All this being said, it’s hard to escape the impression that a lot of today’s buying of nuclear stocks has a momentum trading feel to it.
Fluor stock, for example, is firmly profitable with $1.8 billion in trailing-12-month earnings. However, its actual free cash flow generated over that period was only $512 million. In other words, for every $1 in net income the company reported, it generated just $0.28 in real cash profits. Centrus is similar in this regard, reporting $106 million in earnings, but less than $64 million in real free cash flow.
And Denison Mines?
Denison lost $80 million last year. It isn’t FCF-positive, and in fact hasn’t generated any free cash flow at all in the last seven years. For this reason and others, if I were picking from these three nuclear energy stocks today, I think I’d put Denison at the bottom of my shopping list. Centrus looks a bit better, based primarily on its modest P/E ratio of 15. And Fluor looks like the best bet of all.
Although I’m leery of the vast disparity between reported earnings and free cash flow, and skeptical of the stock’s apparent 3.6 P/E ratio, when valued on free cash flow, Fluor stock still looks pretty attractive at only 12 times FCF. So long as the company can maintain even a low-teens growth rate, the stock should perform nicely.
And if Trump’s executive orders are any indication, growth could soon be coming — for Fluor, and for others.
Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
