Nuclear stocks have enjoyed a brief renaissance over the last couple of weeks thanks to the 2011 White House Budget, which provides for $36 billion in new DOE and government loan guarantees for the construction of new nuclear plants — a figure that is twice as much as the previous loan guarantee program. These loan guarantees would cut down on much of the required costs to finance nuclear plants, and this could help reinvigorate plants that had been tentatively approved and subsequently placed on hold. 

URS (URS) was tossed out by Jim Cramer as the biggest winner in this space, while others noted Fluor (FLR) and Jacobs Engineering Group (JEC). But Shaw Group (SHAW) is in the sweet spot as a fully integrated player that wins in almost any nuclear plant expansion scenario. URS may have more to win from other aspects of the bill because of its diversification, but for the nuclear role, Shaw has historically been a winner. Shaw trades around $32.00 per share, and its 52-week range is $20.14 to $35.14 and trades at 13.3-times a blend of fiscal Aug. 2010 and Aug. 2011 earnings estimates. URS is off its highs at around $4.00 per share with a 52-week range of $27.66 to $53.12 and trades at 13.5-times expected 2010 earnings.  

Cameco Corp. (CCJ), a huge Canadian uranium miner, is harder to call a winner. Because it’s a Canadian company, CCJ would be a distant beneficiary rather than a primary beneficiary, particularly considering that it is diversified. The stock has also pulled back from $30+ to almost $26 in the last three weeks. 

The 2011 budget would add about 10% on spending to manage the nation’s nuclear stockpile and reactors for the Navy. This is not a universal win for all, which may bring some pause to a return of all efforts that had been delayed or effectively been canceled. Yucca Mountain for instance, the long-proposed nuclear dump site, is not included. The initial pop is being met with some renewed caution and for some obvious reasons.

The Obama-Budget wild card remains USEC Inc. (USU). The company lost the loan guarantee last summer for its giant new centrifuge project in Ohio, despite the belief by many that the project was going to get backing. This stock was at $3.65 before the details came out in the new budget inclusions and sits close to $4.20 today. We recently covered the speculative stock options trade on this one, but the trouble here is that this remains unfinished business. Until we have a clearer picture from the 2011 budget, the status is “less unfavorable” but not a dedicated win. If that loan does get a guarantee, then USEC will be a home run. The company is also a win from the U.S. and Russian dismantling of nuclear weapons stockpiles in the Megawatts to Megatons project. 

If you want to see the broadest measure of concern, then the Market Vectors Nuclear Energy ETF (NLR) has not continued on short-term gains. Actually, it has traded lower since late January. At $20.80, the 52-week range is $14.36 to $25.53, and the ETF share price was north of $23.00 before the nuclear hype came into play in January. That is far more diverse with global nuclear power stocks, so that is of little surprise.

Reuters had noted that a group called the Centre for International Governance Innovation in Canada cautions that “new reactor construction will be held back by a series of economic, security and waste disposal issues.” That report has more of a Canadian bias, but it shows some risks for two economies that are tightly intertwined. 

Another concern is that just because the Obama budget includes these allowances, that does not translate to significant wins being assured. The budget has to get passed, and we know how many red and black pens on both sides of the aisle are busy making changes or recommendations to every aspect of it. The Obama administration had originally been against nuclear but then warmed up to it, but then again did not deliver for USEC that DOE loan guarantee which the company had believed was going to occur last summer.

Just a week ago it seemed that the nuclear sector was going to be the next major growth area in energy. That may still take place, but the market is telling us based upon these share prices that this is not a sure-thing. This sector is likely to follow headlines out of policymakers in D.C. rather than just trading in a straight line with a known financial outcome.

Tell us what you think here.

Related Articles:

• 8 Policy-Proof Stocks That Will Survive Washington
• Chinese ETFs, Funds Take a Hit in Latest Sell-Off
• Surprise Winners of the China/India Outsourcing War