Cameco (TSX:CCO), one of the world’s largest uranium producers, has long been a staple in Canada’s resource sector. Recently, its stock has taken a hit, creating an opportunity for long-term investors looking for exposure to the nuclear energy market. While short-term volatility has led to a pullback, Cameco stock’s fundamentals remain strong, thus making it a compelling buy-and-hold stock for those willing to look past near-term fluctuations.
Into earnings
In its latest earnings report for Q4 2024, Cameco stock reported a profit attributable to equity holders of $135 million, or $0.31 per diluted share. That’s up from $80 million, or $0.18 per diluted share, a year earlier. On an adjusted basis, the company earned $0.36 per diluted share, up from $0.25 per diluted share in the same period the previous year. Revenue for the quarter totalled $1.2 billion, reflecting a significant jump from $844 million a year earlier. These results highlight the company’s ability to grow despite challenges in the broader market and fluctuations in uranium prices.
However, despite this earnings beat, Cameco stock experienced a notable decline. Since reaching an all-time high in December 2024, the stock has fallen 32%. This downturn has been driven by broader market concerns, including fears of weakening uranium prices and profit-taking after a strong 2023 and early 2024 rally. While these concerns are valid in the short term, Cameco’s long-term growth prospects remain intact.
One of the key reasons Cameco stock continues to stand out is its production strength. In 2024, the company’s share of uranium production was 23.4 million pounds, marking a 33% increase compared to 2023. The Key Lake mill, which has been a crucial asset for Cameco, achieved a new annual production record and is now positioning itself as a world leader in uranium milling. This increase in production highlights Cameco’s ability to scale operations efficiently, a crucial factor as demand for nuclear energy grows worldwide.
Future outlook
Looking ahead, Cameco stock has ambitious plans to ramp up its tier-one assets. In 2025, the company aims to produce 18 million pounds (on a 100% basis) at both its McArthur River/Key Lake and Cigar Lake operations. These high-quality assets are among the richest uranium deposits globally, thereby giving Cameco a competitive edge over other uranium producers. By focusing on these top-tier mines, the company ensures that it remains one of the lowest-cost producers in the industry, thusly protecting its margins even if uranium prices experience fluctuations.
From a financial standpoint, Cameco stock maintains a solid balance sheet. As of the end of 2024, the company had $600 million in cash and cash equivalents, plus $1.3 billion in long-term debt. This financial strength allows Cameco to invest in expansion opportunities, optimize existing operations, and weather any short-term pricing pressures in the uranium market. The company’s ability to generate strong operating cash flow also provides flexibility for strategic initiatives, including potential acquisitions or production expansions.
For income-focused investors, Cameco stock’s dividend strategy adds another layer of appeal. In November 2024, the company increased its annual dividend by 33% to $0.16 per share and has laid out plans to raise it by at least $0.04 per share annually through 2026. If executed, this plan would effectively double the dividend compared to 2023 levels. While Cameco stock is not known for being a high-yield dividend stock, its commitment to returning value to shareholders through consistent dividend increases makes it an attractive option, especially for long-term investors who seek both growth and income.
Bottom line
Cameco stock’s role in the global nuclear energy transition cannot be overlooked. With increasing demand for clean and reliable energy sources, nuclear power has been gaining renewed interest. Governments worldwide are investing in nuclear energy infrastructure to meet emission reduction targets, and Cameco stock is well-positioned to benefit from this shift. The company secured long-term supply contracts with utilities, ensuring steady demand for its uranium production. As the world moves away from fossil fuels, the importance of nuclear energy, and by extension, uranium producers like Cameco stock, will only grow.
