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Should You Buy, Sell, or Hold Energy Fuels (UUUU) Before Q2 Earnings?
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Energy Fuels Inc. (UUUU - Free Report) is anticipated to record a loss and a revenue decline when it reports second-quarter 2024 results on Aug 5.
The Zacks Consensus Estimate for Energy Fuels’ second-quarter bottom line is pegged at a loss of 6 cents per share, suggesting a wider loss from the 3 cents reported in the second quarter of 2023. The estimate has been unchanged over the past 30 days.
Image Source: Zacks Investment Research
The consensus estimate for UUUU’s revenues is $3.85 million, indicating a 44% slump from the year-ago quarter's actual.
Earnings Surprise History
Energy Fuel’s earnings beat the Zacks Consensus Estimates in two of the trailing four quarters, missed in one and matched the same in another quarter. The company has a trailing four-quarter negative earnings surprise of 82.1%, on average. The trend is shown in the chart below.
Image Source: Zacks Investment Research
What the Zacks Model Unveils
Our proven model does not conclusively predict an earnings beat for Energy Fuels this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that is not the case here.
Earnings ESP: UUUU has an Earnings ESP of 0.00%. You can uncover the best stocks before they’re reported with our Earnings ESP Filter.
Uranium prices peaked at a 16-year high of $106 per pound on Jan 22, 2024, but have since experienced a moderate pullback. Prices have been above the $80 level since then, buoyed by geopolitical tensions and supply concerns. In early May, U.S. President Joe Biden signed the Prohibiting Russian Uranium Imports Act that banned Russian uranium imports and earmarked $2.7 billion to bolster the development of the domestic uranium-processing industry. This move also supported uranium prices, which averaged $87.88 per pound for the second quarter and were 61% higher than the second quarter of 2023.
Energy Fuels had earlier stated that it would sell 200,000 pounds of uranium per its existing portfolio of long-term contracts in 2024. However, this was completed in the first quarter of 2024. It sold an additional 100,000 pounds of uranium on the spot market to gain from the price spike. A utility customer has the option to purchase a further 100,000 pounds of uranium from Energy Fuels in 2024. However, no time was specified for the transaction.
Considering that uranium prices remained range-bound in the second quarter, and REE (rare earth elements) and vanadium prices were lower, we do not expect any significant sales at the spot market for the quarter. In the second quarter of 2023, Energy Fuels sold a substantial 80,000 pounds of uranium to a major U.S. nuclear utility, generating uranium concentrate revenues of $4.34 million. It also sold 127,185 kgs of rare earth carbonate for $2.27 million. Thus, elevated sales in the prior-year quarter are expected to have led to an unfavorable comparison for UUUU’s revenues in second-quarter 2024.
Energy Fuels expects to produce 150,000-500,000 pounds of finished uranium in 2024, depending on the timing of the ramp-up of production at Pinyon Plain, La Sal and Pandora mines, and the White Mesa mill. Till then, it intends to buy uranium and uranium/vanadium ore on the spot market to fulfill its contract requirements, replace sold inventory, meet contract obligations and gain exposure to future price increases. The rise in uranium purchases is expected to have impacted its second-quarter earnings.
Selling, general and administrative expenses (SG&A) are expected to have been higher due to increased salaries and benefits related to the additional headcount associated with the business enhancement efforts. The ongoing progression of the RE Carbonate production program at the White Mesa mill is expected to have led to increased costs in the second quarter.
Lower sales of uranium and prices combined with higher SG&A expenses, an increase in uranium purchases and elevated operating costs are expected to have weighed on UUUU’s second-quarter earnings.
Price Performance & Valuation
Shares of Energy Fuels have declined 30.1% in the past six months against the industry's 18.5% growth.
Image Source: Zacks Investment Research
The UUUU stock is overvalued compared with its industry. It is currently trading at a forward sales multiple of 7.32, well above the industry average of 3.20.
Image Source: Zacks Investment Research
The company is, however, cheaper than peers Cameco (CCJ - Free Report) and Uranium Energy (UEC - Free Report) , who are trading at price-to-sales ratios of 12.32 and 22.32, respectively.
Investment Thesis
The demand for uranium is surging due to growing electricity consumption, global decarbonization efforts and data center expansion. The ban on Russian uranium imports and $2.7 billion in funding to restore domestic nuclear fuel capacity will increase the demand for locally sourced uranium. With a debt-free balance sheet, industry-leading mineral resources and a pipeline of high-quality, large-scale development and exploration projects, Energy Fuels is poised to ride on this demand. However, its efforts to boost the REE business pose risks as the market is dominated by China. The recent decline in uranium prices could limit the stock’s short-term performance.
Conclusion
The current trend in uranium prices and increased costs are expected to have affected the company’s profitability in the to-be-reported quarter. However, this is temporary, as supply pressure and solid demand fundamentals point to higher sustained uranium prices in the future. Energy Fuels plans to raise its capacity to meet this demand. Investors, who already hold UUUU shares, should continue to retain the stock in their portfolios to benefit from the solid long-term fundamentals of the uranium markets. However, given its premium valuation, new investors can wait for a better entry point.
Image: Bigstock
Should You Buy, Sell, or Hold Energy Fuels (UUUU) Before Q2 Earnings?
Energy Fuels Inc. (UUUU - Free Report) is anticipated to record a loss and a revenue decline when it reports second-quarter 2024 results on Aug 5.
The Zacks Consensus Estimate for Energy Fuels’ second-quarter bottom line is pegged at a loss of 6 cents per share, suggesting a wider loss from the 3 cents reported in the second quarter of 2023. The estimate has been unchanged over the past 30 days.
The consensus estimate for UUUU’s revenues is $3.85 million, indicating a 44% slump from the year-ago quarter's actual.
Earnings Surprise History
Energy Fuel’s earnings beat the Zacks Consensus Estimates in two of the trailing four quarters, missed in one and matched the same in another quarter. The company has a trailing four-quarter negative earnings surprise of 82.1%, on average. The trend is shown in the chart below.
What the Zacks Model Unveils
Our proven model does not conclusively predict an earnings beat for Energy Fuels this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that is not the case here.
Earnings ESP: UUUU has an Earnings ESP of 0.00%. You can uncover the best stocks before they’re reported with our Earnings ESP Filter.
Zacks Rank: The company currently carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Factors Likely to Shape Q2 Results
Uranium prices peaked at a 16-year high of $106 per pound on Jan 22, 2024, but have since experienced a moderate pullback. Prices have been above the $80 level since then, buoyed by geopolitical tensions and supply concerns. In early May, U.S. President Joe Biden signed the Prohibiting Russian Uranium Imports Act that banned Russian uranium imports and earmarked $2.7 billion to bolster the development of the domestic uranium-processing industry. This move also supported uranium prices, which averaged $87.88 per pound for the second quarter and were 61% higher than the second quarter of 2023.
Energy Fuels had earlier stated that it would sell 200,000 pounds of uranium per its existing portfolio of long-term contracts in 2024. However, this was completed in the first quarter of 2024. It sold an additional 100,000 pounds of uranium on the spot market to gain from the price spike. A utility customer has the option to purchase a further 100,000 pounds of uranium from Energy Fuels in 2024. However, no time was specified for the transaction.
Considering that uranium prices remained range-bound in the second quarter, and REE (rare earth elements) and vanadium prices were lower, we do not expect any significant sales at the spot market for the quarter. In the second quarter of 2023, Energy Fuels sold a substantial 80,000 pounds of uranium to a major U.S. nuclear utility, generating uranium concentrate revenues of $4.34 million. It also sold 127,185 kgs of rare earth carbonate for $2.27 million. Thus, elevated sales in the prior-year quarter are expected to have led to an unfavorable comparison for UUUU’s revenues in second-quarter 2024.
Energy Fuels expects to produce 150,000-500,000 pounds of finished uranium in 2024, depending on the timing of the ramp-up of production at Pinyon Plain, La Sal and Pandora mines, and the White Mesa mill. Till then, it intends to buy uranium and uranium/vanadium ore on the spot market to fulfill its contract requirements, replace sold inventory, meet contract obligations and gain exposure to future price increases. The rise in uranium purchases is expected to have impacted its second-quarter earnings.
Selling, general and administrative expenses (SG&A) are expected to have been higher due to increased salaries and benefits related to the additional headcount associated with the business enhancement efforts. The ongoing progression of the RE Carbonate production program at the White Mesa mill is expected to have led to increased costs in the second quarter.
Lower sales of uranium and prices combined with higher SG&A expenses, an increase in uranium purchases and elevated operating costs are expected to have weighed on UUUU’s second-quarter earnings.
Price Performance & Valuation
Shares of Energy Fuels have declined 30.1% in the past six months against the industry's 18.5% growth.
The UUUU stock is overvalued compared with its industry. It is currently trading at a forward sales multiple of 7.32, well above the industry average of 3.20.
The company is, however, cheaper than peers Cameco (CCJ - Free Report) and Uranium Energy (UEC - Free Report) , who are trading at price-to-sales ratios of 12.32 and 22.32, respectively.
Investment Thesis
The demand for uranium is surging due to growing electricity consumption, global decarbonization efforts and data center expansion. The ban on Russian uranium imports and $2.7 billion in funding to restore domestic nuclear fuel capacity will increase the demand for locally sourced uranium. With a debt-free balance sheet, industry-leading mineral resources and a pipeline of high-quality, large-scale development and exploration projects, Energy Fuels is poised to ride on this demand. However, its efforts to boost the REE business pose risks as the market is dominated by China. The recent decline in uranium prices could limit the stock’s short-term performance.
Conclusion
The current trend in uranium prices and increased costs are expected to have affected the company’s profitability in the to-be-reported quarter. However, this is temporary, as supply pressure and solid demand fundamentals point to higher sustained uranium prices in the future. Energy Fuels plans to raise its capacity to meet this demand. Investors, who already hold UUUU shares, should continue to retain the stock in their portfolios to benefit from the solid long-term fundamentals of the uranium markets. However, given its premium valuation, new investors can wait for a better entry point.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.