Shares in uranium, nuclear fuels, and nuclear operating plant services company Cameco Corporation (CCJ -0.13%) powered higher by 15.2% in November, according to data provided by S&P Global Market Intelligence. The move coincides with a solid third-quarter earnings report released early in the month in an environment of improving optimism around the role of nuclear energy in the provision of power.
Cameco powers higher
The underlying results from Cameco were good in the third quarter, with adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) rising by 32% to $308 million compared to the same quarter a year ago. In addition, management raised its 2024 uranium production outlook to 23.1 million pounds of uranium from a previous outlook of 22.4 million pounds on the back of an improved outlook at one of its top-tier mining operations in Key Lake, Saskatchewan.
The major contributor to Cameco's segmental profit came from its uranium segment, responsible for $240 million in adjusted EBITDA, with nuclear operating services company Westinghouse (Cameco owns a 49% stake) responsible for $122 million, and finally fuel services, which contributed $28 million.
Cameco has a bright future
That said, investors aren't buying Cameco for what it is now, but instead what it could become. As CEO Tim Gitzel noted in the earnings presentation, "We are continuing to see a positive shift in government, industry, and public support for nuclear energy, further supported by recent announcements between utilities, reactor developers, and the industrial energy users."
Gitzel's optimism is backed up by high-profile agreements signed by the leading cloud services companies to procure nuclear-powered energy: Microsoft, Alphabet's Google, and Amazon have all signed deals this year.
Image source: Getty Images.
In addition, energy equipment and services company GE Vernova's CEO, Scott Strazik, also declared he was "excited about the sentiment shift back toward nuclear" with a "new archetype of customers that are interested in nuclear power, are going to ultimately, in most cases, still have a traditional nuclear operator running those plants." That's excellent news for GE Vernova's small nuclear services business and even better news for Westinghouse.
A pickup in demand for nuclear reactors would strengthen demand for uranium, leading to profit expansion at Cameco. In addition, service demand will increase. There's a lot to like about Cameco. If the current trend toward nuclear energy as a carbon-free solution to ever-growing energy needs continues, the company will inevitably grow into its valuation of 28 times the estimated 2025 earnings.
