Shares of Energy Fuels UUUU have fallen 4% since it reported third-quarter 2024 results on Oct. 31. UUUU incurred a loss of 7 cents in the quarter, in contrast to earnings of 7 cents in the year-ago quarter, as revenues plunged 63% year over year. The company missed the Zacks Consensus Estimates for revenues and earnings.

The UUUU stock closed at $6.05 on Nov. 6. Year to date, Energy Fuels’ shares have declined 15.9% against the industry’s 20% rise. It has also lagged the broader Zacks Basic Materials sector’s dip of 0.6% and against the S&P 500’s climb of 21.5%.

UUUU's YTD Performance

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Is this dip in the stock a buying opportunity? To assess, it is important to look at the factors influencing the decline, review the third-quarter results and evaluate the stock’s investment potential.

Decoding Energy Fuels’ Q3 Results

The company’s revenues plunged 63% year over year to $4.05 million. It missed the Zacks Consensus Estimate of $5.1 million by a margin of 20.7%. The decline was attributed to lower uranium sales in the quarter. Energy Fuels sold 50,000 pounds of uranium concentrate for $80.00 per pound on the spot market. The company had sold 180,000 pounds to a major U.S. nuclear utility in the third quarter of 2023.

UUUU reported a quarterly loss of 7 cents per share in the third quarter of 2024, wider than the year-ago quarter’s loss of 2 cents. The consensus estimate for the quarter’s bottom line was pinned at a loss of 5 cents. The loss resulted from transaction and integration costs related to the Donald Project joint venture, acquisition of Base Resources and recurring operating expenses.

Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.

Key Developments in Q3 for UUUU

Energy Fuels signed a long-term sales contract with a U.S. nuclear utility, marking the fourth one in its portfolio. Under the contract, Energy Fuels expects to deliver 270,000-330,000 pounds of uranium between 2026 and 2027, possibly adding 180,000-220,000 pounds until 2029. 

The company completed the final commissioning of the Phase 1 rare earth elements (REE) separation circuit at its White Mesa Mill in Utah and produced around 38 tons of 'on-spec' separated NdPr (neodymium-praseodymium). Samples have been sent for product qualification, and initial testing responses have been promising.

The separation circuit can generate up to 1,000 metric tons of separated NdPr per year, making it one of the world's largest commercial REE separation circuits, except for China.

Energy Fuels Lowers 2024 Outlook on Pinyon Concerns

Energy Fuels has temporarily paused ore shipments from its Pinyon mine in Arizona. This was due to concerns raised by the Navajo Nation regarding the transport of radioactive materials through the Navajo lands. Mining, however, has continued at Pinyon, with the mined ore being stockpiled at the mine site.

Factoring this setback, Energy Fuels expects to produce 150,000-200,000 pounds of finished uranium in 2024, lower than the prior stated 150,000-500,000 pounds. 

With no contract sales scheduled for the remainder of the year, UUUU will look for opportunities to sell uranium on the spot market to take advantage of any price increase.

UUUU Boasts a Debt-Free Balance Sheet

As of Sept. 30, 2024, Energy Fuels had $183.2 million of working capital, including $47.46 million of cash and cash equivalents, $101.15 million of marketable securities (interest-bearing securities and uranium stocks), $35.91 million of inventory, and no debt. 

This is commendable compared with the industry’s debt-to-capital ratio of 28%. Meanwhile, peers Cameco CCJ and NexGen Energy NXE have debt-to-capital ratios of 18.5% and 28%, respectively.

Recent Acquisitions Highlight UUUU’s Diversification Efforts

Base Resources to Boost REE Production: In October, Energy Fuels acquired Base Resources Limited to become a leading global producer of REE — essential in various clean energy technologies. This will also strengthen UUUU’s potential to become a major producer of titanium and zirconium minerals.

Base Resources’ Toliara Mineral Sand Project complements Energy Fuels’ Bahia Mineral Sand Project in Brazil and 49% stake in the Donald Mineral Sand Project in Australia. With this move, UUUU ensures a long-term supply of monazite that can be processed to produce advanced REE materials at its White Mesa Mill, a cost-effective and capital-efficient strategy.

Despite the solid prospects, Energy Fuels’ efforts to grow its REE business have been perceived as risky due to China’s dominance in the sector. On-ground activities have been suspended at the Toliara project since 2019 due to resistance from local communities. The project is currently subject to negotiations of fiscal terms with the Madagascar government. It is also awaiting certain government approvals and actions before the suspension can be lifted and development can be carried out.

RadTran to Capitalize on Isotope Shortage: Targeted alpha therapy is showing great promise in clinical trials for the treatment of cancer. It requires certain isotopes (Ra-226 and Ra-228) that are scarce in supply.

To address this issue, Energy Fuels recently acquired RadTran LLC to use its know-how to recover these isotopes from its process streams at the White Mesa Mill.

Energy Fuels Expected to Return to Profitability in 2025

Bottom-line estimates for UUUU for 2024 have been unchanged following the third-quarter results. The loss estimate for 2024 is pegged at 11 cents for 2024, which suggests a slight improvement from the loss of 12 cents incurred in 2023.

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Uranium prices have dipped 15.2% year to date and are currently $77.20 per pound. The world’s top uranium miner, Kazatomprom, recently reported a 16% year-over-year increase in third-quarter output, dispelling supply concerns in the near term. The expectation of lower sales amid a weak backdrop for uranium prices will likely lead to a full-year loss for UUUU in 2024.

We believe that the recent downtrend in uranium prices is temporary, as solid demand fundamentals amid limited supply prospects point to higher sustained uranium prices in the future.

The Zacks Consensus Estimate for 2025 earnings has moved up in the past 60 days to 10 cents. This indicates a return to profitability for the company.

Average Target Price for UUUU Suggests Solid Upside

Based on short-term price targets offered by five analysts, the Zacks average price target is at $9.59 per share. The average suggests a 58.51% upside from Wednesday’s closing price.

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UUUU Prepares to Ride on Clean Energy Trends

The global push for clean energy and technological advancement will drive significant demand for uranium and REE. Energy Fuels has four long-term contracts with major U.S. nuclear utilities that require deliveries of base quantities of 2.8 million pounds of uranium through 2030.

The company is preparing two additional mines in Colorado and Wyoming (Whirlwind and Nichols Ranch), which could increase uranium production to a run rate of more than two million pounds per year as early as 2026. Energy Fuels is also advancing several other large-scale U.S. mine projects to raise the capacity to 5 million pounds per year to bet on the robust uranium market conditions.

UUUU’s Valuation Looks Stretched

Energy Fuels is currently trading at a forward sales multiple of 7.88, well above the industry average of 3.39. The company is, however, cheaper than peers Cameco and Uranium Energy’s UEC price-to-sales ratios of 9.12 and 34.54, respectively.

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Should You Buy UUUU Stock Now?

Even though Energy Fuels’ earnings were lower than expected in the third quarter, it made two important acquisitions — Base Resources and RadTran. Backed by UUUU’s debt-free balance sheet, the company is advancing with its growth plans to capitalize on the expected surge in uranium and REE demand. For those who already own the stock, it will be prudent to stay invested for solid long-term prospects in both uranium and REE markets.

However, considering its premium valuation, shipment issues at Pinyon and the ongoing suspension at Toliara, new investors should monitor Energy Fuels’ developments closely for a more appropriate entry point. The stock’s Zacks Rank #3 (Hold) supports our thesis. 

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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