Centrus Energy's Costs Drop 27% in H1: Can It Maintain the Momentum?

Core Insights - Centrus Energy (LEU) reported a significant 27% year-over-year reduction in the cost of sales for the first half of 2025, leading to a 113% increase in gross profit to $86.8 million despite a 2% decline in revenues [1][5][12] Cost of Sales Analysis - In 2024, the LEU segment experienced a 56% increase in the cost of sales, primarily due to a 67% rise in the average unit cost of Separative Work Units (SWU) sold, partially offset by a 4% decrease in SWU volumes [2] - The Technical Solutions segment saw a 69% increase in the cost of sales, attributed to costs related to the HALEU Operation Contract during its transition from Phase 1 to Phase 2 [3] - For the first half of 2025, the LEU segment's cost of sales was $95.1 million, down 40% year over year, driven by a 22% decline in the average unit cost of SWU sold and a 12% decrease in SWU volumes [4] - The Technical Solutions segment's cost of sales was $45.7 million, a 42% increase year over year, mainly due to a $13.8 million rise in costs under the HALEU Operation Contract [4] Gross Profit Performance - The LEU segment generated $81.9 million in gross profit for the first half of 2025, reflecting a 144% year-over-year increase, influenced by the timing and composition of multi-year contracts [6] - The Technical Solutions segment reported a gross profit of $4.9 million, down 33% from the previous year, due to increased costs under the HALEU Operation Contract [7] Industry Comparison - Energy Fuels reported a 48% increase in its cost of sales to $21.8 million in the first half of 2025, resulting in a gross loss of $0.7 million, attributed to lower revenues and higher costs [8][9] - Cameco experienced a 31% year-over-year increase in costs in the first half of 2025, but still achieved a 46% increase in gross profit to CAD 527 million ($381 million) due to higher revenues and sales volumes [10][11] Stock Performance and Valuation - Centrus Energy shares have increased by 337.5% year-to-date, outperforming the industry growth of 16.6% and the Basic Materials sector's rise of 22% [13] - The company is trading at a forward 12-month price/sales multiple of 8.30X, significantly higher than the industry's 3.06X [14] Earnings Estimates - The Zacks Consensus Estimate for Centrus Energy's 2025 earnings is $4.34 per share, indicating a 2.91% year-over-year decline, with a further decline of 20.6% expected for 2026 [15]