Cameco's share price experienced an upward surge despite reporting disappointing earnings.
Cameco saw a 4% climb in its stock price till 11:50 a.m. ET on Thursday, despite posting mixed earnings for the quarter.
Analysts anticipated the uranium mining company to report sales of $535.8 million for the quarter. Surprisingly, Cameco surpassed this forecast with sales of $721 million. However, the company failed to meet expectations in profitability, reporting a loss of $0.01 per share on an adjusted basis instead of the anticipated $0.18 per share. On a GAAP basis, Cameco managed to eke out a profit of $0.02 per share, but earnings still plunged by 94%.
Q3 Earnings of Cameco
The discrepancy in figures can be attributed to Cameco's CEO, Tim Gitzel, who explained that quarterly earnings can fluctuate significantly. However, the surge in revenue to $721 million signifies a prolonged trend of improved operational performance and enhanced cash flow generation, courtesy of rising market prices.
Sales for the quarter skyrocketed by 25%. To continue this trend, Cameco announced plans to boost uranium production from its mines by 700,000 pounds this year, bringing the total to 23.1 million pounds. Additionally, the company aims to offset less uranium purchased from Kazakhstan for supply commitments to customers by utilizing increased domestic production.
In theory, these changes should lead to higher profits as Cameco saves on payments to Kazakhstan middlemen.
Is Cameco Stock a Wise Investment?
Cameco showed its confidence by announcing its intent to enhance its dividend. The proposed dividend amount is set at $0.16 for 2024, with the potential to rise to $0.24 per share by 2026 - essentially doubling the 2023 dividend payout.
Management anticipates a steady cash flow generation to fuel these higher dividends as average uranium prices are projected to touch $77.80 per pound, thereby increasing 2024 revenue to at least $3 billion, potentially even reaching $3.2 billion - exceeding a 50% growth from 2023 revenue.
Given that analysts predict a profit of $0.50 per share this year, and Cameco stock currently costing more than $53 per share (resulting in a P/E ratio surpassing 100), it's challenging to label Cameco as a "value stock". However, it's equally challenging to dismiss the compelling "growth narrative" presented.
In light of Cameco's plans to increase uranium production and potential surge in revenue, some investors may be interested in investing in the company to capitalize on its growth potential. This strategy could involve putting more money into finance, with the hope of earning higher returns in the future.
On the other hand, Cameco's current stock price and high P/E ratio might deter some value investors who typically seek companies with lower valuations and higher potential for profit growth at a lower cost. Therefore, the decision to invest in Cameco stock depends on an individual's investment strategy and risk tolerance, focusing on either growth or value.
