Cameco (CCJ) Hits a 52-Week High: What's Aiding Its Rally?
Cameco Corporation CCJ shares scaled a new 52-week high of $41.83 on Sep 25 before closing the session a tad lower at $41.49.
CCJ has a market capitalization of $17.3 billion. Its shares have gained 57.1% over the past year compared with the industry’s growth of 23.4%.
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What’s Driving Cameco?
Rise in Uranium Prices: Shares of Cameco have gained on the back of the surge in uranium prices. Uranium prices have increased 34.4% in a year, driven by concerns regarding supply amid bullish long-term demand. Uranium has soared to more than $65 per pound in September from levels seen in 2011.
Demand for the metal has risen in recent times due to its application in nuclear energy production and the increasing popularity of nuclear as a renewable energy resource. Per the World Nuclear Association’s latest report, the global demand for uranium in nuclear reactors is expected to be 130,000 tons in 2040, whereas the same is pegged at 65,650 tons for 2023.
Active Long-term Contracting: In 2022, the company signed a record number of long-term supply contracts and conversion services, which accelerated its growth. Cameco secured a 12-year contract with Energoatom, Ukraine's state-owned nuclear energy company, and a 10-year agreement with Bulgaria in 2023.
These contracts will assist the company in establishing its footprint in the Central and Eastern Europe markets.
Solid Balance Sheet: Cameco is committed to keeping its balance sheet robust. As of Jun 30, 2023, the company had $2.5 billion in cash and cash equivalents, and short-term investments. Its total debt at the end of second-quarter 2023 was $1 billion. The company has a total debt-to-total capital ratio of 0.14, significantly lower than the industry's 0.27.
In addition, CCJ has a $1-billion undrawn credit facility, which will mature on Oct 1, 2026.
Strong Performance in Uranium and Fuel Services Segments: In the first six months of 2023, the company delivered 15.2 million pounds in its uranium segment at an 11% higher average realized price than that in the period-year period. In the fuel services segment, sales in the first six months of 2023 were 12% higher year over year. It sold at a 5% higher average realized price than that reported in 2022.
This is likely to continue in the upcoming quarters due to favorable market conditions and the company’s long-term contracts in place.
Favorable Market Fundamentals: Cameco is benefiting from the tremendous momentum in the nuclear energy business and the increasing supply risk induced by geopolitical changes. Government policies and corporate decisions around the world are being accompanied by plans, commitments and activities to support the nuclear fuel cycle and re-energize nuclear power as a fundamental source of clean, secure and low-cost energy.
Zacks Rank & Stocks to Consider
Cameco currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks from the basic materials space are Hawkins, Inc. HWKN, Carpenter Technology Corporation CRS and L.B. Foster Company FSTR. HWKN and CRS sport a Zacks Rank #1 (Strong Buy) at present, and FSTR carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Hawkins has an average trailing four-quarter earnings surprise of 25.5%. The Zacks Consensus Estimate for HWKN’s fiscal 2024 earnings is pegged at $3.40 per share. The consensus estimate for 2024 earnings has moved 38% north in the past 60 days. Its shares gained 58% in the last year.
Carpenter Technology has an average trailing four-quarter earnings surprise of 10%. The Zacks Consensus Estimate for CRS’s fiscal 2024 earnings is pegged at $3.48 per share. The consensus estimate for 2023 earnings has moved 8% north in the past 60 days. Its shares gained 109.6% in the last year.
L.B. Foster has an average trailing four-quarter earnings surprise of 134.5%. The Zacks Consensus Estimate for FSTR’s 2023 earnings is pegged at 53 cents per share. Earnings estimates have been unchanged in the past 60 days. FSTR’s shares gained 98.4% in the last year.
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