CCJ slides post earnings; Pullback provides opportunity for investors looking for exposure to the nuclear power sector
2min read 
Cameco Corporation (CCJ), a leading uranium producer, reported its fourth-quarter earnings for the year. The company exceeded earnings expectations but fell slightly short on revenue. However, Cameco remains optimistic about its prospects in the uranium market.
Shares have tumbled 10% in early trade which sets up as a possible entry point for investors looking for exposure to the uranium market and nuclear energy. The 50-sma sits below at $46 and sets up as a key test of support for the stock.
In the fourth quarter, Cameco recorded adjusted earnings per share of CAD $0.21, surpassing the consensus of CAD $0.18. The company's revenues saw a significant increase of 61.1% year-on-year, reaching CAD $844 million, slightly above the expected CAD $781.6 million.
Cameco's strong performance can be attributed to higher sales volumes and realized prices in both its uranium and fuel services segments. The company achieved double-digit growth in net earnings, adjusted net earnings, and cash flow from operations, with adjusted EBITDA rising by an impressive 93% compared to the previous year.
Looking ahead to 2024, Cameco has outlined its plans to increase production and improve financial performance. The company aims to produce 18 million pounds of uranium at each of its McArthur River/Key Lake and Cigar Lake facilities. Additionally, Cameco intends to extend the mine life of the Cigar Lake operation until 2036. The company plans to assess the potential for expanding production at the McArthur River/Key Lake site to its annual licensed capacity of 25 million pounds when the market conditions are favorable.
Cameco is also closely monitoring the production impact at JV Inkai in Kazakhstan due to a sulfuric acid shortage, which may affect its purchase obligation and overall production in 2024 and beyond. Furthermore, the company expects robust financial performance by producing 13.5 to 14.5 million kgU at its Port Hope conversion facility, including 12 million kgU of UF6, to meet the demand for conversion services at a time when conversion prices are at historic highs.
The ongoing rise in uranium prices further strengthens Cameco's prospects. Spot enrichment prices have surged by 38%, and conversion prices have reached record highs. Uranium spot prices have more than doubled from $48 per pound at the end of 2022 to $100 per pound at the end of January 2024.
Cameco's recent acquisition of Westinghouse Electric Company is expected to contribute to its future financial performance. The company plans to leverage this acquisition and continue transitioning to a tier-one cost structure, making necessary capital expenditures to position itself for sustainable growth.
The growing global demand for nuclear power and the uncertain supply landscape have led to increased long-term contracting activity in the uranium market. Around 160 million pounds of uranium were placed under long-term contracts by utilities in 2023, highlighting the heightened security of supply risk.
To conclude, Cameco's latest earnings report demonstrates its solid financial performance, exceeding earnings expectations while experiencing significant revenue growth. The company's positive outlook for 2024, driven by strategic production plans and favorable market conditions, suggests the potential for continued success and cash flow generation. Cameco remains well-positioned to capitalize on the increasing demand for uranium and the upward trend in prices across the nuclear fuel cycle.