Cameco Corporation (TSX:CCO)(NYSE:CCJ), one of the world’s largest producers of uranium, announced second-quarter earnings results on the morning of July 30, and its stock has responded by falling over 1%. Let’s take a closer look at the results to determine if we should consider using this weakness to begin scaling in to long-term positions, or if we should look elsewhere for an investment instead.
Breaking down its second-quarter performance
Here’s a summary of Cameco’s second-quarter earnings results compared with its results in the same period a year ago.
| Metric | Q2 2015 | Q2 2014 |
| Adjusted Earnings Per Share | $0.12 | $0.20 |
| Revenue | $564.52 million | $501.97 million |
Source: Cameco Corporation
Cameco’s adjusted earnings per share decreased 40% and its revenue increased 12.5% compared with the second quarter of fiscal 2014. The company’s double-digit percentage decline in earnings per share can be attributed to its adjusted net income decreasing 41.8% to $46 million. This is primarily due to higher administrative expenses and a favourable legal settlement of $28 million in the year-ago period.
Its strong revenue growth can be attributed to its average realized selling price of uranium increasing 14.3% to $58.04 per pound, which more than offset the negative impact of its sales volume decreasing 1.4% to 7.3 million pounds, and led to its revenue from the sale of uranium increasing 12.8% to $424 million.
Here’s a quick breakdown of six other notable statistics from the report compared with the year-ago period:
- Total uranium produced and purchased increased 118.6% to 9.4 million pounds
- Production volume of uranium increased 35% to 5.4 million pounds
- Purchase volume of uranium increased 1,233.3% to four million pounds
- Revenue increased 30.6% to $81 million in its NUKEM segment
- Revenue remained unchanged at $70 million in its fuel services segment
- Gross profit increased 12.5% to $153 million
Cameco also announced that it will be maintaining its quarterly dividend of $0.10 per share, and the next payment will come on October 15 to shareholders of record at the close of business on September 30.
Should you buy Cameco today?
It was a good quarter overall for Cameco, so I think its stock should have responded by moving higher. With this being said, I think the slight post-earnings drop represents a great long-term buying opportunity, especially because the stock now trades at very attractive forward valuations, including just 15.2 times fiscal 2015’s estimated earnings per share of $1.15 and only 13.5 times fiscal 2016’s estimated earnings per share of $1.30, both of which are inexpensive compared with its five-year average price-to-earnings multiple of 27.3.
In addition, Cameco pays an annual dividend of $0.40 per share, which gives its stock a solid 2.3% yield at today’s levels.
With all of the information above in mind, I think Cameco represents the best long-term investment opportunity in the uranium industry today. Foolish investors should take a closer look and strongly consider establishing positions.
