Shares of giant uranium miner Cameco (NYSE:CCJ) fell as much as 13% in the first half hour of trading on July 29. You don't need to be a nuclear physicist to figure out what caused the drop: The Canadian miner reported earnings today.
The headline on the company's press release was telling: "Cameco Reports Second Quarter Results -- Well Positioned Financially, Supported by Cigar Lake Restart." The company was, basically, trying to accentuate the positives before investors got into the meat of the quarterly update. On the positive side, revenue was up 35% year over year in the quarter, beating analyst expectations by around 30%. However, earnings missed expectations with the red ink slightly more than doubling year over year. Adjusted earnings were even worse, with the loss almost quadrupling. In the end, investors were clearly not pleased with the numbers and reacted by selling the stock.
However, there were some legitimately good signs for the future. For example, Cameco noted that uranium prices have increased this year and appear to be holding at the higher level. That's very good news in an industry that has been struggling with oversupply for a long time. The company also won a tax dispute it was fighting with the Canadian government, which will free up some cash that had been tied up in the issue. More cash is never a bad thing, especially in light of COVID-19. And Cameco plans to reopen one of its key mines (Cigar Lake) in September, which suggests management's opinion of the uranium market is greatly improved.
Cameco has been muddling through a very difficult period for the uranium market. The tough quarter is just another example of that, though it appears to be doing relatively well given the circumstances. Although there seem to be some silver linings on the clouds, long-term investors should probably continue to expect tough going here for a little while longer.