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Why USEC (USU) Stock Is Surging Today

Stocks in this article: USU

NEW YORK (TheStreet) -- USEC  (USU) surged Tuesday after a judge cleared the nuclear fuel supplier to begin polling creditors about a Chapter 11 bankruptcy plan.

The plan would put the company, which the U.S. government contracts, into the hands of bondholders. Judge Christopher Sontchi approved voting materials for USEC's restructuring at a hearing in U.S. Bankruptcy Court in Wilmington, Del. on Monday. The company plans return to court in September after the ballots come in to try to confirm its Chapter 11 plan.

USEC has been talking with the U.S. Department of Energy to extend the government support that has sustained the power plant fuel supplier for years. The company has been seeking a loan guarantee but has yet to receive one.

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USEC is also waiting for Congress to decide on more funding under a contract for the American Centrifuge Project, according to The Wall Street Journal.

The stock was up 12.42% to $6.79 at 11:45 a.m. More than 4.6 million shares changed hands, compared to the average volume of 854,589.

Separately, TheStreet Ratings team rates USEC INC as a "sell" with a ratings score of E+. TheStreet Ratings Team has this to say about their recommendation:

"We rate USEC INC (USU) a SELL. This is based on the combination of unfavorable investment measures, which should drive this stock to significantly underperform the majority of stocks that we rate. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, weak operating cash flow and generally disappointing historical performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 2440.0% when compared to the same quarter one year ago, falling from -$2.00 million to -$50.80 million.
  • Net operating cash flow has decreased to -$229.70 million or 31.03% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 58.50%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 118.31% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • USEC INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, USEC INC continued to lose money by earning -$37.28 versus -$245.25 in the prior year.
  • USU, with its very weak revenue results, has greatly underperformed against the industry average of 3.2%. Since the same quarter one year prior, revenues plummeted by 53.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • You can view the full analysis from the report here: USU Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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