Cameco Is Not a One Quarter Story
posted on
Feb 12, 2013 02:33PM
Cameco's vision is to be a dominant nuclear energy company producing uranium fuel and generating clean electricity. Our key strategy to deliver this vision is to sustain and grow uranium production in a way that is safe, clean, cost-effective and communit
Cameco (TSX:CCO,NYSE:CCO), the uranium juggernaut, announced its Q4 and full year 2012 results this morning and shares were trading down by more than 4% at one point. Guidance for the first quarter of 2013 was disappointing due to lower expected uranium sales volumes and lower electricity generation out of Bruce Power. In addition, the company is in a tax spat with the Canada Revenue Agency (CRA). Perhaps these were the rationale for the stock’s soft open, however, Cameco’s tale is bigger than these rather insignificant issues.
Cameco owns some of the largest, lowest cost uranium reserves in the world. The supply and demand of uranium dictate the company’s prospects. Nuclear energy drives uranium demand. Nuclear energy has been through a rough patch in recent years due to the Fukushima disaster in Japan. Long-term however, the supply/demand balance appears very favourable for Cameco.
Several key supply/demand updates were provided in Cameco’s quarterly release. It is here that investors should be focused.
Supply
Demand
The Foolish Bottom Line
In many ways, Cameco shares a story that is similar to its Saskatchewan based neighbor, Potash. While both face short-term uncertainties, the supply/demand outlook for their respective industries line up very nicely for these two global leaders. Cameco’s quarterly results will fluctuate, but the long-term trajectory for this company seems very positive.
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Fool contributor Iain Butler does not own shares in any of the companies mentioned in this report at this time. The Motley Fool has no positions in the stocks mentioned above.