Why Cameco Stock Rose After Disappointing Earnings

Cameco (CCJ 3.65%) stock saw a surprising 4% increase by 11:50 a.m. ET on Thursday, following the release of its quarterly earnings report, which showed mixed results.

Before the Q3 report, analysts had predicted that Cameco would generate $535.8 million in quarterly sales. However, the company exceeded expectations significantly by reporting sales of $721 million, which is a positive development.

On the downside, while Cameco was expected to report a profit of $0.18 per share, the company instead reported an adjusted loss of $0.01 per share. The generally accepted accounting principles (GAAP) profit was slightly better at $0.02 per share, but this still represents a sharp decline of 94% year-over-year.

Cameco's Q3 Earnings Overview

This discrepancy between sales and earnings raised questions among investors. According to CEO Tim Gitzel, Cameco's "quarterly earnings can vary significantly," but the increase in revenue showcases a "clear underlying trend of improving operational performance and cash flow generation, supported by stable and rising market prices."

Notably, sales in Q3 surged by 25%. This upward trend is likely to continue, as Cameco plans to boost uranium production from its mines by 700,000 pounds this year, reaching a total of 23.1 million pounds. This increased output is intended to reduce reliance on uranium purchased from Kazakhstan, which could lead to higher profit margins.

Is Cameco Stock Worth Considering?

In a show of confidence, Cameco has outlined its intentions to grow its dividend, starting with an increase to $0.16 per share in 2024, and potentially reaching as much as $0.24 per share by 2026—double the dividend paid in 2023.

The management team anticipates "strong cash flow generation" to support these increased dividends, as average uranium prices are projected to climb to $77.80 per pound. This could push the company’s revenue in 2024 to at least $3 billion, and possibly as high as $3.2 billion, representing an increase of over 50% compared to 2023.

However, with analysts estimating earnings of only $0.50 per share this year and Cameco stock trading over $53, it gives the stock a P/E ratio exceeding 100. Therefore, while it's challenging to label Cameco as a value stock, the growth narrative associated with the company is compelling.

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

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