Why Cameco Corp. Tanked 6.3% on Friday

Cameco Corp. (TSX:CCO)(NYSE:CCJ), one of the world’s largest uranium producers, announced its third-quarter earnings results before the market opened on Friday, and its stock responded by falling 6.3% in the day’s trading session. The stock now sits more than 39% below its 52-week high of $17.65 reached back on January 16, so let’s break down the quarterly results to determine if now is finally the time to buy.

The results that ignited the sell-off

Here’s a quick breakdown of eight of the most notable financial statistics from Cameco’s three-month period ended September 30, 2017, compared with the same period in 2016:

Metric Q3 2017 Q3 2016 Change
Revenue: Uranium segment $385 million $526 million (26.8%)
Revenue: Fuel services segment $69 million $77 million (10.4%)
Revenue: NUKEM segment $32 million $67 million (52.2%)
Total revenue $486 million $670 million (27.5%)
Gross profit $51 million $146 million (65.1%)
Adjusted net earnings (losses) ($50 million) $118 million >(100%)
Adjusted earnings per common share (EPS) ($0.13) $0.30 >(100%)
Cash provided by operations $154 million $385 million (60%)

What should you do now?

As the numbers above show, it was a horrible quarter overall for Cameco, which has been an ongoing theme for the company in 2017; in the first nine months of the year, its revenue is down 12.7% year over year to $1.35 billion, its gross profit is down 35.2% year over year to $199 million, and its adjusted net earnings have fallen from a positive $0.21 per share in the year-ago period to a loss of $0.36 per share.

With all of this being said, I think the sell-off in Cameco’s stock on Friday was warranted. Furthermore, I would avoid the stock going forward, because I would not risk investing in a company with revenues and earnings in a rapid decline, and because there are much better investment options elsewhere in the industry today.

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Fool contributor Joseph Solitro has no position in the companies mentioned. 

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