3 Positives to Take Away From Cameco’s (TSX:CCO) Q2 Results

Cameco Corp (TSX:CCO)(NYSE:CCJ) failed to impress investors with its most recent quarterly results, but it wasn’t all bad news for the uranium stock.

| More on:

Cameco (TSX:CCO)(NYSE:CCJ) saw its share price continue to fall last week after the company released its latest quarterly results. Although the performance fell short of expectations, there were still some notable improvements that investors shouldn’t ignore. Below are three positives that can be taken away from the results and why Cameco might still be a good buy today.

There’s less uncertainty surrounding the company

Things are getting a bit more predictable for Cameco now that issues surrounding its dispute with the Canada Revenue Agency are getting closer to being resolved. In addition, the company’s dispute with Tokyo Electric Power Company Holdings. (TEPCO) has also been addressed. So far, the results have gone in Cameco’s favour, and they should help give the stock some stability. Although the US$40.3 million award for damages relating to the TEPCO dispute may not have been what Cameco was hoping for, it still helps the company close out the issue and prevents it from wasting additional resources pursuing it.

The one uncertainty that still plagues the company and its stock price is the price of uranium. Although the commodity started out 2019 strong, it has continued to decline, and at this rate, it could fall below last year’s prices. However, as with any commodity, it’s a risk that investors and companies have to live with.

Sales growth coming from new areas

During the quarter, Cameco’s sales rose by 17% year over year and gross profit got a bump up of 62%. Although commodity prices have made it challenging for Cameco, the company has found ways to grow its revenues as best as it can.

Uranium revenues of $293 million were up 24% year over year, as higher volumes helped to offset a slightly lower commodity price. What was interesting is that there was a shift in the makeup of the sales with the Americas showing a significant decline of over $51 million; large improvements in Europe and Asia more than made up for that, resulting in a more balanced mix of sales from the different parts of the world that Cameco sells to. Fuel service revenues of $80 million were also up 18% from last year’s tally of $68 million.

Spending has been reduced

Cameco’s management has been very good with controlling costs and spending amid these challenging market conditions. Operating costs of $59 million were a big reduction from the $78 million that Cameco incurred in the prior year. The company has also tightened up its cash as well, with just $209 million spent on investing activities during the quarter compared to $344 million in the prior year.

Bottom line

With Cameco’s stock trading around its 52-week low, it could be a good buy on the dip. Although its earnings may not have been very strong, there were some good improvements that should give investors some hope in the stock, especially over the long term.

For investors willing to take on some risk, this could be a great contrarian bet to take today.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor David Jagielski has no position in any of the stocks mentioned.

More on Metals and Mining Stocks

todder holds a gold bar
Metals and Mining Stocks

Canadian Mining Stocks: Buy, Sell or Hold?

Investing in quality gold mining stocks that trade at a reasonable valuation could help you beat the TSX index over…

Read more »

People walk into a dark underground mine.
Metals and Mining Stocks

Is First Quantum Minerals Stock a Buy?

Let's dive into whether First Quantum Minerals (TSX:FM) is worth buying at current levels, or if investors should sit this…

Read more »

nugget gold
Metals and Mining Stocks

Competitive? Beat the Market With These 2 Dividend-Paying Growth Gems

Investors looking to beat the market buying dividend stocks right now need to focus on this right sectors. Here are…

Read more »

nugget gold
Metals and Mining Stocks

A Canadian Billionaire Investor Sold Micron Stock and Bought This TSX Company Instead

Prem Watsa focuses on value over short-term growth.

Read more »

Concept of multiple streams of income
Metals and Mining Stocks

Is Franco-Nevada Stock a Buy for Its 1.2% Dividend Yield?

Gold royalty stocks represent a niche in the precious metals industry. They have different dynamics from mining stocks.

Read more »

todder holds a gold bar
Metals and Mining Stocks

The 1 Mining Stock Canadians Should Buy and Hold Forever

Newmont is a gold mining stock that trades at a cheap valuation, making it a top investment choice for those…

Read more »

Metals and Mining Stocks

Top Canadian Gold Stocks to Buy Now

Canadian gold mining stocks such as Barrick Gold and Kinross Gold are two top investments in October 2024.

Read more »

todder holds a gold bar
Stocks for Beginners

Is the Worst Over for SSR Mining Stock?

SRR Mining stock has been rising higher after recent earnings performance that made a bit of a comeback. So is…

Read more »