Nuclear energy has become a hot topic lately as nations around the world search for carbon-free ways of generating electricity, explains Mike Cintolo, a leading growth stock specialist and editor of Cabot Top Ten Trader.
A U.S. Senate committee just approved a bill that, if passed into law, would fast-track the deployment of a new fleet of advanced nuclear reactors. The favorable vote boosted shares of Cameco (CCJ) — one of the world’s largest uranium miners — on the prospects that its output will help fill the accelerating demand for the energy.
This point was highlighted in Cameco’s Q1 earnings call, in which management indicated “there’s never been a better time to be a pure-play investment in the growing demand for nuclear energy,” especially given the firm’s premier, tier-one assets in Canada.
Cameco produced 4.5 million pounds of uranium in Q1 — more than doubling the year-ago total — led by a more than three-million-pound production ramp at its McArthur River mine (the world’s largest high-grade uranium deposit).
This contributed to revenue of nearly $690 million in the quarter (up 73%) and EPS of 27 cents that beat estimates by 11 cents. The top brass said that recent legislative decisions in five of the world’s G7 nations in support of the nuclear energy sector will provide a significant tailwind for many years that supports “full-cycle demand growth” for nuclear power and the uranium required to run reactors.
To that end, the company has been growing its pipeline in the last couple of years, including the addition of 80 million pounds worth of long-term uranium contracts (a record). For 2023, Cameco expects over 20 million pounds of production of the metal (nearly double the year-ago total if realized), while analysts see the bottom line soaring this year and next.
Technically, CCJ actually avoided the worst of the damage during the bear market — the shares hit a new high in early April last year, and while the action after that wasn’t great, the stock hit higher lows over the months.
And starting in February, the shares set up a nice base, and the big-volume move a few weeks ago looks like the start of something meaningful. We’re OK buying a little here and adding if CCJ continues higher.