Energy generation works on a simple concept: Generate heat and use it to turn water into steam. This steam runs the turbines to generate electricity. Different sources are used to generate the initial heat which may include water, coal, solar, wind, and nuclear energy sources. Depending on the source used for the initial heat, the generated power (and the operating company) is classified as hydro, thermal, solar, wind, or nuclear electricity (company).
- Nuclear power generates electricity by harnessing the power of atoms and the energy stored in their chemical bonds.
- Investors can gain exposure to nuclear power companies through several stocks.
- In 2018, the nuclear power sector rose 3.7% on an annual basis.
- Nuclear power, however, can be controversial with the prospect of radiation leaks and other accidents.
Nuclear Power and Profits
Nuclear energy harnesses the power of atoms, the building block of all matter. When atoms split, they release energy. A nuclear plant works by splitting atoms and using the energy released by them in a controlled environment. Certain materials (like uranium), when properly controlled, support chain reaction of such atomic splitting process, which forms the core of the nuclear energy industry. Nuclear energy is a form of power source which is finding increasing use in power generation across the globe.
The nuclear energy sector companies derive their business revenues from multiple modes. They may be involved in production, distribution, and sale of power generated from nuclear sources; in mining of nuclear material (like uranium); in execution of mining projects related to nuclear material; in designing, constructing, and/or maintaining nuclear power facilities and nuclear reactors; and in researching, developing, and supplying necessary machinery, technology, and/or associated services to the companies involved in the nuclear energy business.
807 billion kWh
The net electrical generation of nuclear power plants in the U.S. in 2018, about 20% of total electrical output.
The market cap-weighted MVIS Global Uranium & Nuclear Energy Index tracks the performance of the largest and most liquid companies in the global uranium and nuclear energy segment. During 2018, it grew from the year-start value of 826.36 to the year-end value of 857.84, generating an annual return of around 3.7%. This article discusses the top nuclear energy sector stocks and compares their 2018 performance against that of the above-mentioned sector index. The list comprises of nuclear energy stocks which have a market cap of at least $1 billion. The list is presented in the descending order of the top performing stocks based on the percentage gains realized between January 2, 2018, and December 31, 2018.
List of Top 5 Nuclear Energy Stocks
1. US Ecology Inc (ECOL)
- Market Cap: $1.39 billion
- Performance: 25.2% annual return
2. FirstEnergy Corp (FE)
- Market Cap: $19.83 billion
- Performance: 19.15% annual return
3. Nextera Energy Inc (NEE)
- Market Cap: $84.99 billion
- Performance: 12.08% annual return
4. Exelon Corporation (EXC)
- Market Cap: $45.89 billion
- Performance: 12% annual return
5. Ameren Corp (AEE)
- Market Cap: $16.82 billion
- Performance: 8.8% annual return
US Ecology (ECOL)
The Idaho-based US Ecology is in the business of transportation, treatment, disposal, and recycling of hazardous, non-hazardous, and radioactive nuclear waste. It additionally offers a wide array of field and industrial services.
The company started the year with a healthy set of financial numbers announced for the first quarter, where revenue and profits rose by 6% and 13%, respectively, compared to the year-before quarter. Company’s success in achieving a considerable reduction in interest expenses and insurance payments also helped it improve the bottom line. The better-than-expected quarterly earnings during mid and late 2018 helped the upward run of stock price.
However, a fatal explosion during November at its Grand View hazardous waste site in Idaho causing the death of a worker forced the company to lower its guidance, as it led to internal and regulatory probes forcing the company to re-route waste to other facilities. The incident and subsequent developments led to loss of partial gains as the stock closed the year with 25% returns compared to year-high 50% YTD gains achieved in September of 2018.
Founded in 1996, the Akron, Ohio-based FirstEnergy, along with its subsidiaries, is involved in the generation, transmission, and distribution of electricity generated from a mix of nuclear, scrubbed coal, natural gas, hydroelectric, and other renewable sources.
It has been a steady upward run all throughout the year for the company, as it maintained a record of meeting or exceeding the company-announced outlook for the last three years. While its nuclear energy segment suffered owing to the unwelcome and reluctant move to closing three nuclear plants in August, the company managed to gain on business from other segments. The news about interest from Exelon during July to purchase FirstEnergy’s retail power business further supported the latter’s stock price. November saw the company increasing the dividend for the first time in the last three years. However, a dip was witnessed in December leading to a partial loss of gains in FirstEnergy’s stock price as Exelon sued the company over delays on $140M sale of electric contracts. The stock ended 2018 with around 19% gains.
Nextera Energy (NEE)
Ranked among the largest electricity utility firms of the U.S., the Juno Beach, Florida-based Nextera Energy operates eight plants across the states of Florida, Iowa, New Hampshire, and Wisconsin. It is also in the business of generating renewable energy from wind and sunlight, owning and operating generation, transmission, and distribution facilities to support associated services, and has investments in gas infrastructure assets.
During the start of the year, the steady growth of two of its regulated utility subsidiary companies, Florida Power and Light and NextEra Energy Resources, laid the foundation of a steady upward move in stock price. In May, the company acquired Gulf Power and Florida City Gas company for $6.5 billion adding another 600,000 customers to the existing customer base of 5 million in Florida. The $1 billion acquisition of underwater electric transmission cable system company, Trans Bay Cable, LLC, announced in November is expected to boost the transmission assets of the company, helping it achieve better efficiency and utilization. The developments are expected add $0.15 to $0.20 to the adjusted EPS by 2020 and 2021 for Nextra.
Exelon Corp (EXC)
Primarily engaged in the energy generation business, the Chicago, Illinois-based Exelon operates the largest number of nuclear plants in the U.S. housing 23 reactors. Company’s overall operations span across 48 American states and at select locations in Canada.
Company’s success in running its nuclear facility to its full capacity during record hot summers helped it meet its customer commitments and also supported the stock price with improved investor confidence in operational efficiency. Exelon’s ongoing efforts in cost reduction also helped it report impressive results during 2018. The company’s planned investment of around $21 billion on regulated operations and another $7.8 billion in its merchant power business over the 2018–2021 period to improve operations is expected to boost the growth rate from 6.5% to 7.5%.
Ameren Corp (AEE)
The St. Louis, Missouri-based Ameren Corp operates as a utility holding company through four segments: Ameren Missouri, Ameren Illinois Electric Distribution, Ameren Illinois Natural Gas, and Ameren Transmission. The Ameren Missouri segment comprises its nuclear energy ventures, in addition to natural gas, hydroelectric, methane gas, wind, and solar-based operations.
After a lackluster first quarter, Ameren reported robust second-quarter results when it beat earnings estimates by 22%. The company has outlined a methodical and planned investment schedule targeting infrastructure enhancement and growth-oriented projects and is set to invest more than $11 billion through to the year 2022. The bulk of the investment, around $4.5 billion, is slated to go to Ameren Missouri which includes nuclear energy projects. The company plans to add around 700 MW of wind generation by 2020 at an investment of around $1 billion. The company ended the 2018 year with annual gains of little over 8%.
At the other end of the spectrum, many other nuclear energy stocks made big declines during 2018. PG&E Corporation (PCG) tanked 46%, Uranium Energy Corp. (UEC) dived 32.6%, BWX Technologies Inc (BWXT) shed 35%, and Dominion Energy Inc (D) tumbled 11%.
Price Performance of Nuclear Energy Sector Stocks in 2018
Graph Courtesy: Yahoo! Finance
Nuclear Energy Sector Wrap-up
Nuclear energy provides 60% of America's clean, zero-carbon energy, and 20% of the nation’s total electricity. While there are concerns about the pertinent issues of contamination and hazards linked to the use of dangerous nuclear material which may lead to tragedies, the nuclear source is preferred for a generation of carbon emission-free clean electricity at a relatively lower cost as compared to other conventional power generation methods.
The world nuclear industry status report 2018 highlights that share of nuclear energy in the world’s power generation has remained almost stable at around 10.3% over the past five years. France, South Korea, the United States, and the United Kingdom remain the top nations where nuclear energy contributed a significant percentage to country’s electricity, while China, Chile, and Indonesia are emerging as growth markets. With global electricity consumption expected to grow 45% by 2040, nuclear energy is expected to contribute a larger share across the globe to fulfill the increasing power needs.