Why Cameco Earnings Could Surprise You
Cameco will release its quarterly report on Thursday, and given the doldrums that the stock has been stuck in for years, many investors aren't paying much attention to the uranium producer. But the apparent success of one stock in the sector has once again raised interest in the industry, and if nuclear power can regain some of its lost attraction, then Cameco earnings could start posting the growth that shareholders have longed to see.
Cameco relies on the strength of uranium prices to generate revenue, and with the global shift away from nuclear power in the aftermath of the Fukushima reactor disaster and the discovery of plentiful unconventional sources of cheap natural gas, the long-term demand picture for uranium looks a lot less favorable than it did a few years ago. Still, with ongoing concerns about carbon emissions, nuclear power holds ongoing promise. 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 quarterly report.
Stats on Cameco
Analyst EPS Estimate
Change From Year-Ago EPS
Change From Year-Ago Revenue
Earnings Beats in Past 4 Quarters
Source: Yahoo! Finance.
Will Cameco earnings break out of their funk?
In recent months, analysts have kept cutting their views on Cameco earnings, marking down their June-quarter estimates by $0.07 per share and their full-year 2013 expectations by more than three times that amount. The stock, though, has performed fairly well, with a modest gain of about 9% since late April.
After the Japanese earthquake and reactor disaster, the picture for Cameco got a lot uglier. Around the world, countries reversed the growing trend toward nuclear power, with some shelving plans for new reactors while others contemplated shutting down existing nuclear capacity. Nevertheless, Cameco still believes that total nuclear capacity will reach 510 gigawatts in the next decade, with 64 gigawatts of that coming from facilities that are currently under construction. With its mines making up a sixth of total world production, Cameco stands to gain from increased demand when it comes.
Surprisingly, some of that demand might come from Japan. Some believe that the recent victory of Prime Minster Shinzo Abe's Liberal Democratic Party could boost prospects for the uranium sector, as Abe has remained steadfastly committed to nuclear energy despite the worries of some voters about the safety of reactor facilities.
Yet much of the new attention to the uranium space has come from USEC , which has soared in recent weeks as investors celebrated the company's winning about $30 million more in government funding for its American Centrifuge project in Ohio. Still, even though the move has helped bolster the Global X Uranium ETF to 17% gains in the past month, Cameco hasn't really seen big gains. In order for Cameco to benefit, it needs to have uranium prices rise, and so far, that hasn't happened, with prices stuck at levels that discourage new mine construction and a supply glut on the market.
In the Cameco earnings report, look to see how the company is positioning itself in light of weak prices. Strategic acquisitions of struggling mines could be a smart move if demand eventually recovers, and given some of the advantages of nuclear power, a recovery seems inevitable in the long run.
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The article Why Cameco Earnings Could Surprise You originally appeared on Fool.com.Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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