Cameco Stock Dips 7% Despite Posting Q4 Earning Beat: How to Play It?

Shares of Cameco CCJ have declined 7% since it reported fourth-quarter and 2024 results on Feb. 20. CCJ’s fourth-quarter earnings were 73% higher than the year-ago quarter as revenues improved 36%. Both metrics beat the Zacks Consensus Estimate.Find the latest EPS estimates and surprises on Zacks Earnings Calendar.However, the share price decrease reflected the 24% earnings decline for the year despite a 21% rise in revenues, as well as ongoing concerns at Inkai. Cameco beat the Zacks Consensus Estimate for both earnings and revenues in 2024.The CCJ stock closed at $43.48 on Friday, 30% below its 52-week high of $62.55 and 23% above its 52-week low of $35.43. In the past six months, Cameco shares have gained 2.7% against the industry’s 3.7% decline. Meanwhile, the broader Zacks Basic Materials sector has moved down 7.1%, while the S&P 500 has climbed 7.6%.Cameco’s Price Performance Image Source: Zacks Investment Research The company’s peer NexGen Energy NXE has lost 12% over the past six months, whereas Energy Fuels UUUU has slipped 4.7%.CCJ Shares Trade Below 50-Day & 200-Day SMAs Image Source: Zacks Investment Research The CCJ stock is currently below its 50-day and 200-day moving averages, indicating a bearish outlook.Let us delve deeper into the company’s fourth-quarter results and long-term prospects before assessing whether to buy, hold or sell the stock.Decoding Cameco’s Q4 & 2024 ResultsRevenues improved 36.5% year over year to $846 million (CAD 1,183 million), which surpassed the Zacks Consensus Estimate of $753 million. The company reported earnings per share of 26 cents (CAD 0.36) in the quarter, which beat the Zacks Consensus Estimate of earnings of 23 cents.Cameco produced 6.1 million pounds of uranium in the fourth quarter, 7% higher than the year-ago quarter. It sold 12.8 million pounds of uranium, rising 30% from 9.8 million pounds in the fourth quarter of 2023. The average realized uranium price rose 12% year over year to $58.45 per pound. Higher sales volumes and prices led to a 48% improvement in uranium revenues. The segment’s gross profit soared 122% and adjusted EBITDA surged 70%. In Fuel Services, production volume moved down 3% year over year to 3.6 million kgUs and sales volume was 4.2 million kgUs, flat with the year-ago quarter. The Fuel Services segment witnessed a 10% rise in revenues, mainly led by a 10% increase in average realized prices. Adjusted EBITDA for the segment moved down 4%. Revenues for 2024 rose 21% year over year to $2.2 billion (CAD $3.14 billion) on the back of higher sales volumes and an improvement in average realized prices. The figure beat the Zacks Consensus Estimate of $2.15 billion. In the uranium segment, sales volume grew 5% and prices rose 17%, leading to a 24% increase in full-year revenues. In Fuel services, revenues increased 8% year ovesr year, aided by a 1% rise in sales volumes and 6% higher prices for the year. While the uranium segment reported a 41% increase in adjusted EBITDA, the fuel services segment witnessed a 12% decline.Cameco registered adjusted earnings per share of 47 cents (CAD 0.67), which moved down 24% year over year but surpassed the consensus estimate of 42 cents. The decline was attributed to the impacts of purchase accounting related to the Westinghouse acquisition.Westinghouse reported a net loss of $218 million in 2024 (Cameco’s share). This was expected due to the impacts of purchase accounting, which required the revaluation of its inventories based on market prices at the time of acquisition, and the expensing of some other non-operating acquisition-related transition costs. This will likely have a smaller impact in the future years, although increased depreciation and amortization charges related to purchase accounting will continue to influence Westinghouse’s net earnings.Inkai Affects Cameco’s Projected Production NumbersCCJ’s share of production was 23.4 million pounds in 2024, slightly higher than its expectation of 23.1 million pounds. This was due to a record annual production from the Key Lake mill. It, in fact, set a world record for annual production from any uranium mill.However, production from the joint venture Inkai (on a 100% basis) was 7.8 million pounds (of this Cameco’s share was 3.6 million pounds), 0.6 million pounds lower than in 2023 due to the ongoing supply-chain issues in Kazakhstan. Production at Inkai was temporarily paused on Jan. 1 due to the delayed submission of certain regulatory documents to Kazakhstan’s Ministry of Energy. Even though production resumed on Jan. 23, CCJ stated that production plans for 2025 and subsequent years remain uncertain.Also, Kazakhstan changed the Mineral Extraction Tax (MET) for uranium, effective 2025. Per the new code, the MET rate will increase from 6% to 9% in 2025. From 2026 onward, the tax will be based on production and spot prices.For the uranium segment, Cameco plans to ramp up its tier-one assets, and continue to optimize performance and reliability. The company intends to produce 18 million pounds (100% basis) of uranium at each of McArthur River/Key Lake and Cigar Lake in 2025.In the fuel services segment, CCJ plans to produce between 13 million and 14 million kgU in 2025. Cameco projects uranium deliveries at 31-34 million pounds for 2025. The deliveries will be mostly weighted toward the second half. The company guides 2025 revenues at $3.3-$3.55 billion. Its share of Westinghouse’s 2025 adjusted EBITDA is expected between $355 million and $405 million.CCJ Plans to Double Dividend Payout by 2026In November 2024, Cameco hiked its annual dividend by 33% to 16 cents per share. The company is planning to implement a dividend growth plan of at least 4 cents per share each year through 2026, subject to its board’s approval. This will likely take its annual dividend to 24 cents per share by 2026, doubling from the 2023 payout.Cameco’s Solid Balance Sheet Enables Growth InvestmentAt the end of 2024, CCJ had C$600 million ($422 million) in cash and cash equivalents, and C$1.3 billion ($0.91 billion) in long-term debt.CCJ plans to maintain the financial strength and flexibility necessary to boost production and capitalize on market opportunities. Work is underway to extend the mine life at Cigar Lake to 2036. Cameco is also increasing production at McArthur River and Key Lake from 18 million pounds to its licensed annual capacity of 25 million pounds (100% basis).CCJ’s Earnings Estimates Move DownThe Zacks Consensus Estimate for Cameco’s earnings for both fiscal 2025 and 2026 has moved south over the past 60 days, as shown in the chart below. Image Source: Zacks Investment Research Despite the downgrade, earnings estimates for fiscal 2025 suggest a year-over-year surge of 153%. However, the same for fiscal 2026 indicates a year-over-year decline of 4.8%. Image Source: Zacks Investment Research Cameco Offers Industry-Leading ReturnsCCJ’s return on equity — a profitability measure of how prudently the company utilizes its shareholders’ funds — is 5.6%, higher than the industry’s 1.7%. Image Source: Zacks Investment Research Cameco’s Valuation Looks StretchedThe CCJ stock is trading at a forward price-to-sales ratio of 7.71 compared with the industry’s 1.00. It is above its five-year median of 6.01. Image Source: Zacks Investment Research The company is, however, cheaper than peer Uranium Energy’s UEC price-to-sales ratio of 18.93.CCJ to Ride on Global Focus on Nuclear EnergyGeopolitical events, energy security concerns and the global focus on the climate crisis amid rising low-carbon energy demand have created tailwinds for the nuclear power industry. Given Cameco’s low-cost and high-grade assets, and diversified portfolio spanning the nuclear fuel cycle, it is well-poised to capitalize on these trends. Through 2025-2029, the company has contracts for average annual deliveries of 28 million pounds of uranium per year. These offer CCJ a buffer against potential declines in uranium prices.Should You Buy Cameco Stock Now?Supported by a strong balance sheet, the company is making investments to boost its capacity. Investors holding CCJ shares should continue to retain the stock in their portfolios to benefit from the solid long-term fundamentals. Its dividend growth plan also holds promise.Despite Cameco’s revenues and earnings improving year over year and exceeding expectations in the fourth quarter, the recent downward revision in earnings estimates is concerning. Considering the ongoing challenges at Inkai, the impacts of the new MET imposed by the Kazakhstan government and CCJ’s premium valuation, new investors can wait for a better entry point.Cameco currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Just Released: Zacks Top 10 Stocks for 2025Hurry – you can still get in early on our 10 top tickers for 2025. Handpicked by Zacks Director of Research Sheraz Mian, this portfolio has been stunningly and consistently successful. From inception in 2012 through November, 2024, the Zacks Top 10 Stocks gained +2,112.6%, more than QUADRUPLING the S&P 500’s +475.6%. Sheraz has combed through 4,400 companies covered by the Zacks Rank and handpicked the best 10 to buy and hold in 2025. You can still be among the first to see these just-released stocks with enormous potential. See New Top 10 Stocks >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Cameco Corporation (CCJ): Free Stock Analysis Report Energy Fuels Inc (UUUU): Free Stock Analysis Report Uranium Energy Corp. (UEC): Free Stock Analysis Report NexGen Energy (NXE): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks