Goldman Sachs Maintains Neutral Rating on USEC Inc. (USU)

Goldman Sachs is out with an investor note this morning where they reiterate their Neutral rating on shares of USEC Inc. USU; they have a $4.50 price target on the stock. Goldman said that despite the recently announced deal with Toshiba and Babcock & Wilcox, which will make a $200mn three phase strategic investment in the company, each phase contingent upon progress USEC makes towards securing a $2bn DOE loan guarantee, this is not a full-on remedy for USEC’s financial position. Also, this investment of convertible preferred shares and warrants comes at a cost to existing shareholders, as we anticipate 35-40% dilution upon conversion by 2016. Goldman analysts said that they are revising “2010-2012 estimates to $0.03/0.39/0.93 (from $0.35/0.56/0.65) following the announcement and 1Q10 results released on May 5. After meeting several technical milestones and the Toshiba/B&W investment, we anticipate USEC will be able to resubmit its loan guarantee application this summer. We expect a final decision by 1Q2011.” They closed by saying, “We maintain our Neutral rating, but raise our 6-month price target to $4.50 from $3.50, previously following the strategic investment, which we believe improves the risk/reward profile for investors. We assign a higher probability to USEC’s ability to secure financing and proceed now with ACP deployment.”