Student teams competed this spring in Salt Lake City for the chance to go to New York for a worldwide financial analysis competition by analyzing the stock of a homegrown company, EnergySolutions Inc.
While most teams from the University of Utah, Southern Utah University and Brigham Young University were largely bullish on the nuclear-waste company's stock, the team from Westminster College was more measured. Its detailed look at the company's business trends, financials, credit and future risks won the team a trip to the New York competition and, in light of recent events, seems visionary.
"While we believe overall business trends are improving," says the report summary, "EnergySolutions' future ability to thrive remains uncertain."
Now, two weeks after the board replaced the company's top two executives and year-end guidance was trimmed by $20 million, professional analysts have been raising many of the same concerns the Westminster students first did in March. And EnergySolutions' stock has yet to rebound to pre-shakeup levels.
On Friday, the stock (ES:NYSE) closed at $1.57 per share. That's less than half what it was on June 8, the day before the shakeup was announced and about half what the pros had been calling the target price.
The changes continue to ripple in the market.
The day after the company announced the departure of Val J. Christensen, EnergySolutions' chairman and CEO, and Chief Financial Officer William Benz, Moody's downgraded the company's credit to BBB from BB. And, by that week's end, Standard and Poor's followed suit, downgrading the company's credit rating by two notches, from BB- to B.
"The downgrade reflects weakening credit metrics and the added uncertainty stemming from the unexpected change in management [because] the company's strategic and financial priorities are less clear," S&P said.
The new top officers have been on the board of directors for the past two years, with David Lockwood as the new CEO and Greg Wood as the new CFO. Since the company formed in 2006, there have been three CEOs and five CFOs.
Although Lockwood is described as a "turn-it-around, clean-it-up kind of guy" by the business media, some financial analysts remained reserved.
Al Kaschalk of Wedbush Securities has generally been a fan of the stock over the years, but he said in Barron's last week that EnergySolutions remains a "show me" stock in his view. He cited credit issues around the $1 billion Zions nuclear plant decommissioning project in Illinois, plus declining volumes of waste from plants and government cleanups going to the company's mile-square disposal site in Tooele County.
"The timing of the CEO change caught us off guard," he wrote, "and the replacement with a non-industry CEO was a surprise."
He wondered if Lockwood's appointment was a "temporary solution."
EnergySolutions has declined The Salt Lake Tribune's request to interview Lockwood.
"There's nothing new for us to report," company spokesman Mark Walker said Friday. "We're continuing to work hard."
Now preparing to work on Wall Street, Westminster team member Daniel O'Hare pointed out that a lot of hard work went into his team's analysis. Emphasizing that members are not certified to offer financial advice, he added that the "hold" rating the students suggested for the company has a lot to do with uncertainties in the industry.
"It's an industry that is surrounded by risk," he said, adding quickly that prospects look better five to 10 years ahead. "No one really knows what the nuclear services industry is going to be."