Cameco (TSX: CCO) is expected to report its second quarter financial results on July 27 before the market opens. In Canaccord’s preview, they reiterate their buy rating and C$43 12-month price target, saying, “we remain fundamentally bullish on the outlook for uranium, we remain cautious going into Cameco’s Q2 results.”
There are currently 13 analysts covering the stock with an average 12-month price target of C$43.40, or an upside of 44%. Out of the 13 analysts, 3 have strong buy ratings, 8 have buy ratings, and 1 analyst has a hold rating on the stock. The street high price target sits at C$48, which comes from two analysts and represents an upside of 60%.
For the results, Canaccord expects Cameco to report mixed results and believes investors might have too high of hopes on the contracting volumes. Even with this, they expect Cameco to highlight the positives that have happened over the last three months and expect that the fundamental backdrop will continue to, “serve the company well into the back half of this year.”
Canaccord believes that term contracting volumes can remain muted for this quarter as bottlenecks in enrichment and conversion while everyone is trying to reduce reliance on Russia could lead to a delay in term contracting with Cameco. Though they believe that once this bottleneck fixes itself, it will lead to a period of increased demand for Cameco’s term contracts.
Something to add to the shaky quarter, Canaccord believes management could potentially provide guidance revisions for the McArthur River restart, saying, “Current guidance forecasts production of 5mlbs U3O8 in 2022; we would not be surprised if production fell short of this target.”
Canaccord believes that this is potential because of supply chain issues and the current inflationary environment that is affecting every single commodity company.
Additionally, Canaccord says that the Inkai shipments out of Kazakhstan remain a question after the company flagged it as an elevated risk. They believe that this perspective has not changed but believe that the company can mitigate the risk via swaps. They write, “we’ll be keenly focused on any commentary related to Kazakhstan delivery risk, given its implications for the broader market.”
On the results, Canaccord expects uranium production to remain flat quarter over quarter, coming in at 1.9mlbs, while fuel services are expected to drop to 3.5m kgu for the quarter. The firm also expects 6mlbs of uranium sales and 2.9m kgu of fuel services sales. At the same time, the company is estimated to see a realized price of US$45.50 for a pound of uranium and US$27 for a kgu of fuel services.
This will increase revenues from $398 million last quarter to $448.5 million this quarter, and is estimated to lead to a higher cash flow per share of $0.26, but a lower free cash flow per share, which is expected to come in at $0.21.
Information for this briefing was found via Sedar and Refinitiv. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.