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Stock Analyst Update

No Surprises in Cameco's Results

The narrow-moat firm's financial results will remain weak as long as the uranium markets struggle.


Despite production cutback announcements by  Cameco (CCJ) and NAC KazAtomProm at the end of 2017, uranium prices remain stubbornly weak. Current spot prices languish in the low $20 per pound range, still roughly 40% below prices two years ago. Cameco continues to do what it can to reduce spending and maintain production discipline to bolster free cash flow during the lingering market weakness. Meanwhile, we see little change to our long-term thesis and thus maintain narrow-moat Cameco’s U.S. dollar-denominated fair value estimate of USD 17 per share. The Canadian dollar-denominated fair value estimate falls to CAD 21 per share from CAD 22 due to a slightly weaker U.S. dollar since our last update.

As has been the theme in recent quarters, there was little that surprised us in its fourth quarter’s earnings release. Cameco’s financial results will remain weak as long as the uranium markets struggle.

Although we’ve made adjustments to our near-term forecast based on updated management guidance, our long-term forecast remains intact. We continue to expect a cumulative supply deficit to hit the uranium market by 2023. Due to the long-term nature of uranium contracts, we’d expect to see prices begin improving in 2019 in order to incentivize enough new supply.

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Kristoffer Inton does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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