Why Cameco Stock Rose Despite Mixed Earnings

Cameco's (CCJ 3.65%) stock experienced a 4% increase by 11:50 a.m. ET on Thursday, even after the company reported mixed earnings earlier that day.

Before the Q3 earnings report, analysts had estimated that Cameco would generate around $535.8 million in sales for the quarter. However, Cameco surpassed expectations significantly, reporting sales of $721 million. This aspect of the report was viewed positively.

On the downside, Cameco's profitability did not align with the strong sales figures. Analysts had anticipated earnings of $0.18 per share, but instead, Cameco reported a loss of $0.01 per share on an adjusted basis. Even the GAAP earnings showed a decrease of 94%, coming in at $0.02 per share.

Cameco Q3 Earnings Review

The contrast between strong sales and disappointing profits can be explained by CEO Tim Gitzel's comments. He noted that Cameco's quarterly earnings can fluctuate significantly; however, the company's rising revenue indicates a clear trend of improving operational performance and cash flow generation, supported by stable and increasing market prices.

During the third quarter, Cameco saw a 25% increase in sales. This trend appears set to continue, as Cameco announced plans to boost its uranium production by 700,000 pounds this year, reaching a total of 23.1 million pounds. The increase in domestic production is aimed at reducing reliance on uranium imports from Kazakhstan, which is expected to enhance profit margins by cutting out middlemen costs.

Assessing Cameco Stock

To further reinforce its future outlook, Cameco revealed plans to increase its dividend, starting at $0.16 per share in 2024 and potentially reaching up to $0.24 per share by 2026. This represents a doubling of the dividend paid in 2023.

Management expresses confidence that strong cash flow will allow for these higher dividends, projecting average uranium prices to reach $77.80 per pound. Revenue for 2024 is expected to be between $3 billion to $3.2 billion, marking more than a 50% increase compared to 2023.

Despite these positive indicators, analysts forecast only $0.50 per share in profit for the year and Cameco's stock is trading at over $53 per share, resulting in a price-to-earnings (P/E) ratio exceeding 100. While it may be difficult to categorize Cameco as a value stock at this price point, its compelling growth narrative is hard to overlook.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends Cameco.

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