When the S&P 500 index showed weakness, the stock price of uranium giant Cameco (CCJ) remained strong, reaching a peak increase of 4.9% at 1 PM Eastern Time on Thursday.
The uranium behemoth released robust data for the fourth fiscal quarter and the year 2024 this morning. But more important than the figures were some remarks from management about the nuclear energy market that seemed to catch investors’ attention.
Despite nearly halving its net profit in 2024, uranium demand or sales were not the issue. In fact, Cameco’s revenue increased by 40% year-over-year in the fourth fiscal quarter and by 21% for the full year, primarily driven by price increases. The average price of Cameco’s products rose by 17% to $58.34 per pound, while sales volume grew by 5% in 2024.
The revaluation of inventory following the acquisition of Westinghouse impacted Cameco’s net profit. The company acquired a 49% stake in Westinghouse at the end of 2023, with Brookfield Renewable and its affiliates owning the remainder.
Production at Cameco’s key mine, McArthur River/Key Lake in northern Saskatchewan, hit a record in 2024, which the company mainly attributes to advancements in automation and digitization. Production at its other mine, Cigar Lake, did not meet expectations, but the company anticipates a rebound in 2025.
Why remain optimistic about Cameco’s stock? Management expects a strong performance in the coming year due to favorable market conditions. In fact, the company believes that “the outlook for nuclear energy and nuclear fuel fundamentals is more favorable than it has been in decades.”
Despite recent declines in uranium prices, this is good news for Cameco and its investors. The uranium market, as well as the business of miners like Cameco, depends less on spot prices and more on long-term contracts with utility companies.
As of December 30, 2024, the total volume of long-term contracts was close to 220 million pounds, with a significant number of contracts under discussion. This indicates that utility companies are returning to the uranium contract market after a long downturn, which might be the biggest reason for investors to remain optimistic. Cameco also significantly increased its annual dividend per share by 33% last year and expects this trend to continue.
