Quote of the Day
It is interesting to note that when financial reports show a remarkable increase that is utterly due to unrepeatable events there is little said about what a poor indicator those reports will be of future performance. However, Cameco's president has said it well about how the problems they've had this quarter are a poor indicator of how their company will ultimately perform.
"Since Cameco's quarterly results vary significantly, comparing today's results to a remarkably strong first quarter last year is a poor indicator of future performance," said Jerry Grandey, Cameco's president and CEO."
EPS was 17c this quarter, about half compared to last year. It appears that Mr Grandey is suggesting earnings for the year should be in the $1.25-$1.50 range, but I haven't looked closely enough to really understand what he said with, "We expect our consolidated annual revenue to grow by nearly 50 per cent in 2007."
Cameco is in a position to really take advantage of the uranium bull when they get their flooded mine operational again. Whether that bull has the potential to meet their premium price of $52.58/share right now would require a careful analysis of their operations. Their price has jumped from about $36/share, 46%, last fall when I first looked at Cameco when their mine flooded. That is creation of about $6 billion of market cap. Revenues for Q1 2006 to Q1 2007 fell from $542 million to $409 million. Over a year it works out to about $2 billion in revenue for an $18.4 billion, without dilution, market cap company.
Uranium has definitely moved into bubble valuations for many companies, and many will plummet taking investors life saving with them. Right now it appears there is a lot of future valuation built into Cameco.
It would really require careful analysis to evaluate Cameco's potential. Because they are a producer, they are morely likely to actually make a lot of money on the uranium bull, however, supporting a market cap of $18.4 billion is a pretty tall order. Uranium is different from many other metals in that the approval process to build a new mine takes a lot more time, so it is likely it will take a long time for supply to balance out with demand, giving producers an incredible opportunity to make a lot of money. However, an unsustainable amount of money has poured into uranium stocks.
Tread carefully with this one and do some serious homework. $18.4 billion is a lot of market cap to support. It is likely 2008 earnings will go up as well, but this one is being valued at a P/E of 70 today. Catching up is a tall order.
http://www.canada.com/ottawacitizen/news/business/story.html?id=f5460ba7-7a0d-47ce-abc3-90eb4365cba2&k=18594
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The News Article
Cameco Corp. Q1 profits fall to $59M from $112M on lower revenues
Canadian Press
Published: Monday, April 30, 2007
SASKATOON (CP) - Uranium giant Cameco Corp. (TSX:CCO) reported its first quarter profits were cut by nearly half to $59 million from $112 million on a 25 per cent drop in revenues.
The Saskatoon company said early Saturday it earned 17 cents a share for the three months ended March 31, compared with 32 cents a share for the same 2006 period.
Revenues fell to $409 million from $542 million as the company was affected by lower uranium deliveries and reduced power output from its Bruce Power nuclear power partnership in southwestern Ontario and decreased gold production at its gold mining subsidiary Centerra Gold (TSX:CG).
"Since Cameco's quarterly results vary significantly, comparing today's results to a remarkably strong first quarter last year is a poor indicator of future performance," said Jerry Grandey, Cameco's president and CEO. "We expect our consolidated annual revenue to grow by nearly 50 per cent in 2007.""
Cameco also said it booked $11 million in expenses for work to clean up flooding problems at its Cigar Lake uranium project in Saskatchewan. Meanwhile, the company recorded a net recovery of income taxes of $16 million in the quarter.
Cash from operations in the first quarter was $139 million compared with $286 million in the same period of 2006. The decrease of $147 million reflects lower revenues in the uranium, electricity and gold businesses as well as working capital requirements related mainly to an increase in product inventories in the first quarter of 2007.
In breaking down operations, Cameco reported:
-Earnings before taxes in the uranium business fell to $44 million from $89 million, primarily from lower sales volume in the quarter. Revenue fell by $102 million to $183 million, as a 23 per cent increase in the realized selling price was more than offset by a 48 per cent decline in reported sales volumes.
-Fuel services earnings before taxes were $8 million in the first quarter,, unchanged from last year.
-Pre-tax earnings from the Bruce Power partnership fell to $10 million from $47 million, due to lower generation and higher operating costs related to planned outages in the quarter.
-Gold revenue fell by $11 million to $96 million due to lower production, which more than offset the benefit of a higher realized gold price.
Looking ahead, Cameco said it expects second quarter earnings to be about 50 per cent higher than in the first quarter, reflecting higher expected sales volumes for uranium, conversion and electricity as well as an increase in uranium prices. The projection includes the recognition of $47 million in revenue previously deferred due to the product loan arrangements.
Cameco, based in Saskatoon, is the world's largest uranium producer, a significant supplier of conversion services and one of two Candu fuel manufacturers in Canada. The controls the world's largest high-grade reserves and low-cost operations in Saskatchewan and is a partner in North America's largest nuclear electricity generating plant. Cameco also explores for uranium in North America and Australia, and holds a 53 per cent stake in mid-tier gold producer Centerra.
© The Canadian Press 2007
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