Cameco Corporation (USA): What to Expect From Earnings Friday

Cameco (NYSE: CCJ  ) will release its quarterly report on Friday, and investors haven't been all that optimistic about the uranium company's ability to deliver growth on either the top or bottom lines. As nuclear power plants from Exelon (NYSE: EXC  ) and Southern Company (NYSE: SO  ) run into competition from low-cost natural gas fired plants, one key driver of uranium demand hasn't been in Cameco's favor for a long time, and investors aren't expecting a rebound in 2014, either.

During the 2000s, Cameco and the uranium industry on the whole surged ahead, as soaring fossil-fuel prices made nuclear power look a lot more attractive. But then, the Fukushima Daiichi disaster in Japan happened, leading even committed nuclear power players like Germany take a second look at their long-term nuclear strategies. In the aftermath, Cameco has struggled to regain its momentum, and shares haven't been able to make much headway even from 2008's lowest levels. Let's take an early look at what's been happening with Cameco over the past quarter and what we're likely to see in its report.


Highly enriched uranium. Source: Department of Energy, via Wikimedia Commons.

Stats on Cameco

Analyst EPS Estimate

$0.52

Year-Ago EPS

(13.3%)

Revenue Estimate

$844.26 million

Change From Year-Ago Revenue

(11.9%)

Earnings Beats in Past 4 Quarters

2

Source: Yahoo! Finance.

Will Cameco earnings manage to grow this quarter?
Analysts have had mixed views on Cameco earnings in recent months, boosting their fourth-quarter estimates by a penny per share but cutting their projections for the full 2014 year by $0.15 per share. The stock has managed to make some headway, though, rising 7% since late October.

Cameco's third-quarter earnings report showed just how much progress the company has made over the past year from a fundamental perspective. Its revenue doubled from year-ago levels, with adjusted earnings quadrupling. The company cited higher sales volumes and better prices along with a reduction in spending on exploration as helping to bolster its bottom-line growth, and CEO Tim Gitzel pointed to the restructuring that Cameco has done as delivering cost-saving benefits throughout the company.

Yet the real question that Cameco faces is whether nuclear power will continue to grow even after the Japanese nuclear reactor disaster. Cameco expects continued growth in emerging markets like China and India, with plans for nearly 100 new nuclear reactors to complete construction in the coming decade. Even in Japan itself, efforts to reopen shuttered nuclear reactors could drive uranium demand.

Still, one supply related catalyst could boost interest in Cameco and rival miner Rio Tinto (NYSE: RIO  ) . The end of the Megatons-to-Megawatts program between the U.S. and Russia came last November, and with it, what seemed like an endless supply of warhead-sourced uranium will drop dramatically. That could pressure Exelon, Southern, and other utility users of uranium with higher prices, but it should help increase prospects for Cameco and Rio Tinto to get better profit margins from their mining activity.

In fact, Cameco is refocusing on uranium mining, selling off its almost 32% interest in a Canadian nuclear power facility to one of its partners. With the $450 million in proceeds, Cameco expects to reinvest in its core uranium business.

In the Cameco earnings report, watch to see how well the company capitalizes on what could be growing demand for uranium in the years to come. With analysts expecting sluggish revenue growth and falling earnings in 2014, any positive surprise could lift shares substantially.

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Read/Post Comments (8) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 06, 2014, at 3:06 PM, U3O8Fool wrote:

    In addition to the items mentioned in the article one should keep in mind that the previous quarterly results and associated MD&A report give clear guidance on the following :

    *first shipments to China were completed in previous quarter (Q3)

    *guidance on shipments in the quarter to be reported were reaffirmed at 11 to 13 million lbs at a "improving" contract price, indicating revenues of between $500M and $650M+ from U3O8 sales alone

    *net profit sensitivity to the exchange rate on the Canadian dollar is not insignificant and the Canadian dollar dropped substantially in Q4 compared to Q3 levels

    *the net profit from the first 9 months of 2013 has already exceeded that of all of 2014

    One should also note that Q4 is traditionally the strongest quarter for U3O8 shipments.

    With a large number of Chinese reactors reaching the later stages of construction guidance on U3O8 sales going forward is likely to be substantially buoyed - every single pound of U3O8 sold to China is a new pound of sales for Cameco under the recent Canada/China uranium supply agreement. With so many Chinese reactors requiring start up quantities of U3O8 (typically start up requires 2 X normal annual consumption) and building of reserve supplies for their continued operation shipments to China are not likely to be curtailed any time soon.

    This Q4 report should have some very good numbers for 2013, and even better numbers in the guidance for 2014.

    From a broader market perspective it is also only a matter of time before politicians (led by their finance ministers) lose their appetite for the mothballing and/or phase out of existing nuclear generation.

  • Report this Comment On February 06, 2014, at 3:16 PM, U3O8Fool wrote:

    Correction : the fourth bullet should have read

    * the net profit from the first 9 months of 2013 has already exceeded that of all of 2012

  • Report this Comment On February 07, 2014, at 10:17 PM, U3O8Fool wrote:

    Cameco Q4 reports record annual basic net earnings of $318 million despite $70 million write down on Talvivaara - basic EPS jumps to C$0.81 from C$0.64 in 2012. All figures in Canadian dollars.

  • Report this Comment On February 10, 2014, at 11:38 AM, U3O8Fool wrote:

    Pro nuclear candidate wins Tokyo gubernatorial race, giving political momentum and greater leeway for government of Shinzo Abe to move towards faster reactor restart schedule.

  • Report this Comment On February 17, 2014, at 1:00 PM, U3O8Fool wrote:

    Yomiuri Shimbun (The Japan Times) reports that the new Basic Energy Plan for Japan scheduled for release before the end of March will include nuclear energy as providing "base-load" generation capacity going forward.

    http://the-japan-news.com/news/article/0001022634

  • Report this Comment On February 19, 2014, at 12:42 PM, U3O8Fool wrote:

    Japan's Nuclear Regulation Authority (NRA) announced today that it will fast track selected reactor restart applications.

    http://www.reuters.com/article/2014/02/19/japan-nuclear-rest...

  • Report this Comment On February 19, 2014, at 12:53 PM, U3O8Fool wrote:

    Cracks are showing in the Japanese governments patience with the NRA over delays in processing reactor restart applications :

    http://blogs.wsj.com/japanrealtime/2014/02/18/tokyo-gets-imp...

  • Report this Comment On February 20, 2014, at 9:22 AM, U3O8Fool wrote:

    The picking of cherries will precede the blossoming of cherries this year at Japan's Nuclear Regulatory Authority - reactors without substantive remedial action to meet the new NRA safety standards are being selected to lead the way through the restart process to it's completion and act as examples for other restarts.

    This represents a major shift in the mode of operation of the NRA, which to this point has apparently been mired in self reflection on the interpretation of it's mandate to the point that none of the applications for restart, which were scheduled for completion by the end of December, were sufficiently advanced that they would even give a target date for completion.

    http://www.japantimes.co.jp/news/2014/02/20/national/nra-to-...

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