Cameco Uranium Major 'Heading Into a Bigger Q4'

By: The_Gold_Report

The Q3/19 results and the Q4/19 outlook are outlined in a BMO Capital Markets report.In a Nov. 5 research note, BMO Capital Markets analyst Alexander Pearce wrote that following the reporting of Q3/19, the outlook for Cameco Corp. (CCO:TSX; CCJ:NYSE) "remains robust, with a strong balance sheet and upside potential if uranium prices recover quicker than expected."

Q4/19 is expected to be more active than Q3/19, as is typical for the uranium company, Pearce noted. For one, BMO expects Cameco to make record purchases in Q4/19 of greater than 7,000,000 pounds (7 Mlb) of uranium, including 1.2 Mlb from Inkai, to meet the midpoint of guidance. Further, BMO expects Cameco to sell 13.5 Mlb of uranium in Q4/19, which would constitute a quarterly record and which should drive CA$157 million of free cash flow.

An improved uranium price would boost Cameco's multiples, and BMO also expects the price to increase in the near term. This would result from a continued supply deficit and increased competitive tension in the spot market from Cameco's purchases.

As for Q3/19, Pearce reported that Cameco experienced an estimated loss of CA$0.13 per share versus BMO's forecast loss of CA$0.01. The loss was mostly due to the company selling less uranium than expected, a total 6.1 Mlb versus 7.2 Mlb. Regardless, Cameco subsequently maintained guidance for sales and purchases.

BMO lowered its EBITDA estimates, by 1% for 2019 to CA$408 million and by 2% for 2020 to CA$382 million.

Cameco ended Q3/19 with CA$132 million of net debt and expects to turn net cash in 2020, indicating the company is in a "robust position," Pearce noted.

BMO has an Outperform rating and a CA$16 per share price target on Cameco, whose stock is currently trading at around CA$12.59 per share.

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Disclosures from BMO Capital Markets, Cameco, November 5, 2019

IMPORTANT DISCLOSURES

Analyst's Certification I, Alexander Pearce, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.

Analysts who prepared this report are compensated based upon (among other factors) the overall profitability of BMO Capital Markets and their affiliates, which includes the overall profitability of investment banking services. Compensation for research is based on effectiveness in generating new ideas and in communication of ideas to clients, performance of recommendations, accuracy of earnings estimates, and service to clients.

Company Specific Disclosures Disclosure 5: BMO Capital Markets or an affiliate received compensation for products or services other than investment banking services within the past 12 months from Cameco. Disclosure 6C: Cameco is a client (or was a client) of BMO Nesbitt Burns Inc., BMO Capital Markets Corp., BMO Capital Markets Limited or an affiliate within the past 12 months: C) Non-Securities Related Services. Disclosure 8A: BMO Capital Markets or an affiliate has a financial interest in 1% or more of any class of the equity securities of Cameco. Disclosure 8C: BMO Capital Markets or an affiliate has a financial interest in 0.5% or more in the issued share capital of Cameco. Disclosure 8D: BMO Capital Markets or an affiliate has a short financial interest in 0.5% or more in the issued share capital of Cameco. Disclosure 9B: BMO Capital Markets makes a market in Cameco in United States.

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