The shares of Cameco (TSX: CCO)(NYSE: CCJ) have been falling, despite crushing Street analysts’ earnings estimates in the first quarter. After announcing its results on Thursday, Cameco stock fell by 6.7% for the session. And it’s continuing to extend these gains this morning, as it was trading with nearly 3% day losses at the time of writing at $30.54 per share.
Cameco is a Saskatoon-based uranium and fuel services company with a market cap of about $12.6 billion. Before we discuss whether CCO stock looks worth buying after its latest quarterly results, let’s review its financial growth trends and other key highlights from its earnings event.
Cameco’s revenue missed expectations
In Q1 2022, Cameco’s total revenue rose by 37.3% YoY (year over year) to $398 million — slightly lower than Street analysts’ consensus expectations of $402 million. The company registered an 18% YoY rise in its uranium sales volume for the quarter. This higher sales volume and a 34% increase in both the U.S. and Canadian dollar average realized price mainly boosted its total revenue in the last quarter.
In contrast, its fuel services revenue stood at $76 million in Q1 — down about 10% YoY. Overall, its revenue miss and a YoY decline in its fuel services revenue could be two of the reasons why investors reacted negatively to Cameco’s Q1 financial results.
But its earnings crushed estimates
As a result of normal quarterly variations in contract deliveries, Cameco managed to crush analysts’ earnings estimates. In the first quarter, the uranium company’s adjusted net profits stood at $17 million — much better compared to its adjusted net loss of $29 million in the first quarter of 2021 and also far better than this analysts’ estimate of $27.5 million loss.
As a result, Cameco’s adjusted earnings stood at four cents per share in Q1 — crushing estimates of two cents per share loss. The recent rally in uranium prices also favoured the company’s bottom line in the last quarter.
Cameco’s latest production updates
Earlier this year, Cameco announced its plan to ramp up production at its McArthur River and Key Lake mines to meet its 2024 annual production goal. As a result, the company expects to incur between $15 million to $17 million per month in operational readiness costs until it achieves a reasonable production rate. In its latest earnings report, Cameco revealed that it experienced delays and deferrals in project work at its Cigar Lake mine due to the suspension in production in 2021 — introducing risks to its production in 2022.
The company also highlighted that “the collective agreement between Orano and unionized employees at the McClean Lake mill expires on May 31, 2022.” This could lead to a risk to its production plan “if Orano is unable to reach an agreement and there is a labour dispute.”
Is Cameco stock worth buying now?
It’s important to note that quarterly variations in contract deliveries were among the key reasons why Cameco beat its Q1 earnings estimates, as I noted above. However, its lower-than-expected revenue numbers and latest production updates look full of uncertainties, which could hurt investors’ sentiments in the near term, making its stock risky to buy right now. And investors who already own it may want to keep a close eye on its future production updates.
