Cameco Shares Gain 6% Despite Q3 Earning Miss: How to Play the Stock?

The most recent trading session ended with Uranium Energy (UEC) standing at $7.93, reflecting a -0.63% shift from the previouse trading day's closing. The stock's performance was behind the S&P 500's daily gain of 0.38%. At the same time, the Dow added 0.59%, and the tech-heavy Nasdaq gained 0.09%.

Prior to today's trading, shares of the uranium mining and exploration company had gained 16.16% over the past month. This has outpaced the Basic Materials sector's loss of 0.49% and the S&P 500's gain of 4.9% in that time.

The upcoming earnings release of Uranium Energy will be of great interest to investors. The company's upcoming EPS is projected at -$0.01, signifying steadiness compared to the same quarter of the previous year. At the same time, our most recent consensus estimate is projecting a revenue of $17.1 million, reflecting a 15445.45% rise from the equivalent quarter last year.

Regarding the entire year, the Zacks Consensus Estimates forecast earnings of $0.09 per share and revenue of $104.1 million, indicating changes of +200% and +46373.21%, respectively, compared to the previous year.

Additionally, investors should keep an eye on any recent revisions to analyst forecasts for Uranium Energy. These revisions typically reflect the latest short-term business trends, which can change frequently. Hence, positive alterations in estimates signify analyst optimism regarding the company's business and profitability.

Our research shows that these estimate changes are directly correlated with near-term stock prices. We developed the Zacks Rank to capitalize on this phenomenon. Our system takes these estimate changes into account and delivers a clear, actionable rating model.

The Zacks Rank system, ranging from #1 (Strong Buy) to #5 (Strong Sell), possesses a remarkable history of outdoing, externally audited, with #1 stocks returning an average annual gain of +25% since 1988. Over the past month, the Zacks Consensus EPS estimate remained stagnant. Currently, Uranium Energy is carrying a Zacks Rank of #3 (Hold).

In the context of valuation, Uranium Energy is at present trading with a Forward P/E ratio of 88.67. This valuation marks a premium compared to its industry's average Forward P/E of 18.56.

The Mining - Miscellaneous industry is part of the Basic Materials sector. With its current Zacks Industry Rank of 170, this industry ranks in the bottom 33% of all industries, numbering over 250.

The Zacks Industry Rank evaluates the power of our distinct industry groups by determining the average Zacks Rank of the individual stocks forming the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

Make sure to utilize Zacks.com to follow all of these stock-moving metrics, and more, in the coming trading sessions.

Zacks Investment Research

Shares of Energy Fuels UUUU have fallen 4% since it reported third-quarter 2024 results on Oct. 31. UUUU incurred a loss of 7 cents in the quarter, in contrast to earnings of 7 cents in the year-ago quarter, as revenues plunged 63% year over year. The company missed the Zacks Consensus Estimates for revenues and earnings.

The UUUU stock closed at $6.05 on Nov. 6. Year to date, Energy Fuels’ shares have declined 15.9% against the industry’s 20% rise. It has also lagged the broader Zacks Basic Materials sector’s dip of 0.6% and against the S&P 500’s climb of 21.5%.

UUUU's YTD Performance

Is this dip in the stock a buying opportunity? To assess, it is important to look at the factors influencing the decline, review the third-quarter results and evaluate the stock’s investment potential.

Decoding Energy Fuels’ Q3 Results

The company’s revenues plunged 63% year over year to $4.05 million. It missed the Zacks Consensus Estimate of $5.1 million by a margin of 20.7%. The decline was attributed to lower uranium sales in the quarter. Energy Fuels sold 50,000 pounds of uranium concentrate for $80.00 per pound on the spot market. The company had sold 180,000 pounds to a major U.S. nuclear utility in the third quarter of 2023.

UUUU reported a quarterly loss of 7 cents per share in the third quarter of 2024, wider than the year-ago quarter’s loss of 2 cents. The consensus estimate for the quarter’s bottom line was pinned at a loss of 5 cents. The loss resulted from transaction and integration costs related to the Donald Project joint venture, acquisition of Base Resources and recurring operating expenses.

Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.

Key Developments in Q3 for UUUU

Energy Fuels signed a long-term sales contract with a U.S. nuclear utility, marking the fourth one in its portfolio. Under the contract, Energy Fuels expects to deliver 270,000-330,000 pounds of uranium between 2026 and 2027, possibly adding 180,000-220,000 pounds until 2029.

The company completed the final commissioning of the Phase 1 rare earth elements (REE) separation circuit at its White Mesa Mill in Utah and produced around 38 tons of 'on-spec' separated NdPr (neodymium-praseodymium). Samples have been sent for product qualification, and initial testing responses have been promising.

The separation circuit can generate up to 1,000 metric tons of separated NdPr per year, making it one of the world's largest commercial REE separation circuits, except for China.

Energy Fuels Lowers 2024 Outlook on Pinyon Concerns

Energy Fuels has temporarily paused ore shipments from its Pinyon mine in Arizona. This was due to concerns raised by the Navajo Nation regarding the transport of radioactive materials through the Navajo lands. Mining, however, has continued at Pinyon, with the mined ore being stockpiled at the mine site.

Factoring this setback, Energy Fuels expects to produce 150,000-200,000 pounds of finished uranium in 2024, lower than the prior stated 150,000-500,000 pounds.

With no contract sales scheduled for the remainder of the year, UUUU will look for opportunities to sell uranium on the spot market to take advantage of any price increase.

UUUU Boasts a Debt-Free Balance Sheet

As of Sept. 30, 2024, Energy Fuels had $183.2 million of working capital, including $47.46 million of cash and cash equivalents, $101.15 million of marketable securities (interest-bearing securities and uranium stocks), $35.91 million of inventory, and no debt.

This is commendable compared with the industry’s debt-to-capital ratio of 28%. Meanwhile, peers Cameco CCJ and NexGen Energy NXE have debt-to-capital ratios of 18.5% and 28%, respectively.

Recent Acquisitions Highlight UUUU’s Diversification Efforts

Base Resources to Boost REE Production: In October, Energy Fuels acquired Base Resources Limited to become a leading global producer of REE — essential in various clean energy technologies. This will also strengthen UUUU’s potential to become a major producer of titanium and zirconium minerals.

Base Resources’ Toliara Mineral Sand Project complements Energy Fuels’ Bahia Mineral Sand Project in Brazil and 49% stake in the Donald Mineral Sand Project in Australia. With this move, UUUU ensures a long-term supply of monazite that can be processed to produce advanced REE materials at its White Mesa Mill, a cost-effective and capital-efficient strategy.

Despite the solid prospects, Energy Fuels’ efforts to grow its REE business have been perceived as risky due to China’s dominance in the sector. On-ground activities have been suspended at the Toliara project since 2019 due to resistance from local communities. The project is currently subject to negotiations of fiscal terms with the Madagascar government. It is also awaiting certain government approvals and actions before the suspension can be lifted and development can be carried out.

RadTran to Capitalize on Isotope Shortage: Targeted alpha therapy is showing great promise in clinical trials for the treatment of cancer. It requires certain isotopes (Ra-226 and Ra-228) that are scarce in supply.

To address this issue, Energy Fuels recently acquired RadTran LLC to use its know-how to recover these isotopes from its process streams at the White Mesa Mill.

Energy Fuels Expected to Return to Profitability in 2025

Bottom-line estimates for UUUU for 2024 have been unchanged following the third-quarter results. The loss estimate for 2024 is pegged at 11 cents for 2024, which suggests a slight improvement from the loss of 12 cents incurred in 2023.

Cameco (CCJ) came out with a quarterly loss of $0.01 per share versus the Zacks Consensus Estimate of $0.26. This compares to earnings of $0.24 per share a year ago. These figures are adjusted for non-recurring items.

This quarterly report represents an earnings surprise of -103.85%. A quarter ago, it was expected that this uranium producer would post earnings of $0.28 per share when it actually produced earnings of $0.10, delivering a surprise of -64.29%.

Over the last four quarters, the company has not been able to surpass consensus EPS estimates.

Cameco, which belongs to the Zacks Mining - Miscellaneous industry, posted revenues of $528.24 million for the quarter ended September 2024, missing the Zacks Consensus Estimate by 4.16%. This compares to year-ago revenues of $428.65 million. The company has not been able to beat consensus revenue estimates over the last four quarters.

The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call.

Cameco shares have added about 18.8% since the beginning of the year versus the S&P 500's gain of 24.3%.

What's Next for Cameco?

While Cameco has underperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock?

There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately.

Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions.

Ahead of this earnings release, the estimate revisions trend for Cameco: mixed. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) for the stock. So, the shares are expected to perform in line with the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

It will be interesting to see how estimates for the coming quarters and current fiscal year change in the days ahead. The current consensus EPS estimate is $0.24 on $735.56 million in revenues for the coming quarter and $0.83 on $2.2 billion in revenues for the current fiscal year.

Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Mining - Miscellaneous is currently in the bottom 33% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

Denison Mine (DNN), another stock in the same industry, has yet to report results for the quarter ended September 2024.

This uranium mining company is expected to post quarterly loss of $0.01 per share in its upcoming report, which represents a year-over-year change of -120%. The consensus EPS estimate for the quarter has remained unchanged over the last 30 days.

Denison Mine's revenues are expected to be $0.8 million, down 61.4% from the year-ago quarter.

Zacks Investment Research

Investors often turn to recommendations made by Wall Street analysts before making a Buy, Sell, or Hold decision about a stock. While media reports about rating changes by these brokerage-firm employed (or sell-side) analysts often affect a stock's price, do they really matter?

Before we discuss the reliability of brokerage recommendations and how to use them to your advantage, let's see what these Wall Street heavyweights think about Energy Fuels (UUUU).

Energy Fuels currently has an average brokerage recommendation (ABR) of 1.60, on a scale of 1 to 5 (Strong Buy to Strong Sell), calculated based on the actual recommendations (Buy, Hold, Sell, etc.) made by five brokerage firms. An ABR of 1.60 approximates between Strong Buy and Buy.

Of the five recommendations that derive the current ABR, three are Strong Buy and one is Buy. Strong Buy and Buy respectively account for 60% and 20% of all recommendations.

Brokerage Recommendation Trends for UUUU

While the ABR calls for buying Energy Fuels, it may not be wise to make an investment decision solely based on this information. Several studies have shown limited to no success of brokerage recommendations in guiding investors to pick stocks with the best price increase potential.

Are you wondering why? The vested interest of brokerage firms in a stock they cover often results in a strong positive bias of their analysts in rating it. Our research shows that for every "Strong Sell" recommendation, brokerage firms assign five "Strong Buy" recommendations.

In other words, their interests aren't always aligned with retail investors, rarely indicating where the price of a stock could actually be heading. Therefore, the best use of this information could be validating your own research or an indicator that has proven to be highly successful in predicting a stock's price movement.

With an impressive externally audited track record, our proprietary stock rating tool, the Zacks Rank, which classifies stocks into five groups, ranging from Zacks Rank #1 (Strong Buy) to Zacks Rank #5 (Strong Sell), is a reliable indicator of a stock's near -term price performance. So, validating the Zacks Rank with ABR could go a long way in making a profitable investment decision.

ABR Should Not Be Confused With Zacks Rank

Although both Zacks Rank and ABR are displayed in a range of 1-5, they are different measures altogether.

Broker recommendations are the sole basis for calculating the ABR, which is typically displayed in decimals (such as 1.28). The Zacks Rank, on the other hand, is a quantitative model designed to harness the power of earnings estimate revisions. It is displayed in whole numbers -- 1 to 5.

Analysts employed by brokerage firms have been and continue to be overly optimistic with their recommendations. Since the ratings issued by these analysts are more favorable than their research would support because of the vested interest of their employers, they mislead investors far more often than they guide.

In contrast, the Zacks Rank is driven by earnings estimate revisions. And near-term stock price movements are strongly correlated with trends in earnings estimate revisions, according to empirical research.

In addition, the different Zacks Rank grades are applied proportionately to all stocks for which brokerage analysts provide current-year earnings estimates. In other words, this tool always maintains a balance among its five ranks.

There is also a key difference between the ABR and Zacks Rank when it comes to freshness. When you look at the ABR, it may not be up-to-date. Nonetheless, since brokerage analysts constantly revise their earnings estimates to reflect changing business trends, and their actions get reflected in the Zacks Rank quickly enough, it is always timely in predicting future stock prices.

Should You Invest in UUUU?

In terms of earnings estimate revisions for Energy Fuels, the Zacks Consensus Estimate for the current year has remained unchanged over the past month at -$0.11.

Analysts' steady views regarding the company's earnings prospects, as indicated by an unchanged consensus estimate, could be a legitimate reason for the stock to perform in line with the broader market in the near term.

The size of the recent change in the consensus estimate, along with three other factors related to earnings estimates, has resulted in a Zacks Rank #3 (Hold) for Energy Fuels. You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here

It may therefore be prudent to be a little cautious with the Buy-equivalent ABR for Energy Fuels.

Zacks Investment Research

Quarterly financial reports play a vital role on Wall Street, as they help investors see how a company has performed and what might be coming down the road in the near-term. And out of all of the metrics and results to consider, earnings is one of the most important.

The earnings figure itself is key, of course, but a beat or miss on the bottom line can sometimes be just as, if not more, important. Therefore, investors should consider paying close attention to these earnings surprises, as a big beat can help a stock climb and vice versa.

Now that we know how important earnings and earnings surprises are, it's time to show investors how to take advantage of these events to boost their returns by utilizing the Zacks Earnings ESP filter.

The Zacks Earnings ESP, Explained

The Zacks Expected Surprise Prediction, or ESP, works by locking in on the most up-to-date analyst earnings revisions because they can be more accurate than estimates from weeks or even months before the actual release date. The thinking is pretty straightforward: analysts who provide earnings estimates closer to the report are likely to have more information.

With this in mind, the Expected Surprise Prediction compares the Most Accurate Estimate (being the most recent) against the overall Zacks Consensus Estimate. The percentage difference provides the ESP figure. The system also utilizes our core Zacks Rank to provide a stronger system for identifying stocks that might beat their next quarterly earnings estimate and possibly see the stock price climb.

When we join a positive earnings ESP with a Zacks Rank #3 (Hold) or stronger, stocks posted a positive bottom-line surprise 70% of the time. Plus, this system saw investors produce roughly 28% annual returns on average, according to our 10 year backtest.

Most stocks, about 60%, fall into the #3 (Hold) category, and they are expected to perform in-line with the broader market. Stocks with a #2 (Buy) and #1 (Strong Buy) rating, or the top 15% and top 5% of stocks, respectively, should outperform the market, with Strong Buy stocks outperforming more than any other rank.

Should You Consider Air Products and Chemicals?

The last thing we will do today, now that we have a grasp on the ESP and how powerful of a tool it can be, is to quickly look at a qualifying stock. Air Products and Chemicals (APD) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $3.50 a share one day away from its upcoming earnings release on November 7, 2024.

Air Products and Chemicals' Earnings ESP sits at +1.63%, which, as explained above, is calculated by taking the percentage difference between the $3.50 Most Accurate Estimate and the Zacks Consensus Estimate of $3.44. APD is also part of a large group of stocks that boast a positive ESP. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they've reported.

APD is just one of a large group of Basic Materials stocks with a positive ESP figure. Energy Fuels (UUUU) is another qualifying stock you may want to consider.

Slated to report earnings on February 28, 2025, Energy Fuels holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $0 a share 114 days from its next quarterly update.

For Energy Fuels, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of -$0.02 is +100%.

APD and UUUU's positive ESP metrics may signal that a positive earnings surprise for both stocks is on the horizon.

Find Stocks to Buy or Sell Before They're Reported

Use the Zacks Earnings ESP Filter to turn up stocks with the highest probability of positively, or negatively, surprising to buy or sell before they're reported for profitable earnings season trading. Check it out here >>

Zacks Investment Research

Cameco Corporation CCJ is scheduled to report third-quarter 2024 results on Nov. 7, before the opening bell.

Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.

The Zacks Consensus Estimate for CCJ’s earnings for the third quarter is pegged at 26 cents per share, which indicates an 8.3% improvement from the prior-year quarter’s reported figure. Over the past 60 days, the estimate has moved up 8.3%.