Wildcatter Cameco Corporation (NYSE: CCJ) reported earnings on January 31 and hosted a conference call yesterday morning. The stock is off roughly 10 to 12 percent since that time. Whenever I see a selloff of that magnitude in a portfolio stock, it’s worth taking a closer look at the results. But based on my analysis, I see no reason to change my bullish opinion on the stock.

Cameco missed analysts’ estimates for the fourth quarter. It appears that Cameco’s exploration and administration expenses were higher than analysts had been modeling. Specifically, expenses were about $16 million higher in the fourth quarter of 2005 as compared to the fourth quarter of 2004; total expenses were about $57 million.

Stock-based compensation was one major contributor to that jump. Compensation rose because Cameco’s stock has performed so well over the past few quarters. Stock-based compensation expenses were roughly $16 million higher than in 2004. Also, exploration expenses ticked notably higher in the fourth quarter.

On the operations front, I see no major changes. Cameco continues to benefit as older uranium supply contracts signed in a much less favorable pricing environment expire and are replaced by much for favorable contracts. Uranium spot prices also continue to rise, so Cameco’s realized prices on new contracts and market-based sales are impressive. Cameco has been able to sign contracts that include escalation clauses–it does benefit from higher spot prices even in some of its longer-term contracts.

The company still hasn’t received regulatory approval to expand production at two of its bigger mines, something that could be a concern, but this is hardly unusual as regulatory processes can be lengthy.

In addition Cameco noted some of the recent developments I’ve been discussing in The Energy Strategist. Management noted the reevaluation of nuclear phase-out plans currently underway in both Germany and the UK. Cameco also noted that it has been talking in depth to China and that China is likely to be a major customer. According to Cameco, China’s uranium reserves are of very low quality and are not commercial for large-scale production.

What’s more, the Russians are currently supplying roughly 24 million pounds of uranium annually to a world market of 175 to 185 million pounds. This uranium is coming not from mines but from decommissioned Russian nuclear warheads. That convention is set to expire in 2013 and there is significant speculation that it will not be renewed. The reason is that Russia’s uranium production has been low in recent years and they will likely need the uranium to run their own plants. This is another key contributor to tightening supply as we look out further into the future.

Bottom line: I’ll continue to monitor the stock, but my initial assessment is that Cameco is on track and the long-term story is unchanged. The stock had rallied aggressively for months and it’s likely short-term expectations simply were too aggressive. As the stock starts to stabilize from the initial sell-off yesterday it will offer an attractive opportunity to jump into the stock.

I will be issuing more updates and discuss the stock again in next week’s issue of The Energy Strategist.