Scotia Capital Scotia Capital analyst Orest Wowkodaw predicts most miners will see first-quarter 2024 financial results “meaningfully deteriorate” on both a quarter-over-quarter and year-over-year basis, expecting a weaker seasonal operating performance to more than offset the benefit of slightly improved commodity prices.
“Overall, our estimates appear below current consensus expectations for most companies,” he added. “Despite the challenging operating environment, we do not anticipate any material guidance changes this quarter. We expect only a few company-specific catalysts with no improvements to shareholder returns. With the large and mid-cap producers currently trading at an elevated estimated average implied Cu [copper] price of $5.55 per pound (34 per cent above spot and a new record premium), it remains unclear if significantly improved investor sentiment will look through a potentially disappointing Q1 reporting season.”
Mr. Wowkodaw now sees his EBITDA estimates for large and mid-cap producers sitting on average 25 per cent below the consensus projections on the Street.
“Among the mid- to large-cap producers, we forecast CCO-T, CIA-T, CS-T, ERO-T, FM-T, HBM-T, IVN-T, LUN-T, NEXA-N, and TECK.B-T to meaningfully miss consensus EBITDA expectations, with only FCX-N expected to post a modest beat,” he said. “On an EPS basis, we forecast below-consensus results for all companies except for IVN-T; TECK.B-T is likely to post materially weaker than expected EPS due to QB2 accounting nuances (finance expense and minority interest). We profile our quarterly EPS, EBITDA, and guidance performance vs. consensus tracker ... and note that FCX-N has the best track record of meeting EBITDA expectations over the past four and eight quarters; ERO-T has the weakest.”
While he sees “elevated” valuations, Mr. Wowkodaw increased his target multiples for stocks in his coverage universe, pointing to a “markedly improved investor sentiment for commodity equities.
“As a result, our 12-month targets have increased by an average of 15 per cent for the large/mid-cap producers and by an average of 10 per cent for our coverage universe,” he said.
The analyst’s changes includeThe analyst’s changes include:
- Cameco Corp. ( “sector outperform”) to $75 from $71. Average: $73.58.
“In our view, only FCX appears relatively well positioned heading into the Q1/24 reporting season,” he said. “Despite our Q1 concerns, TECK.B-T, CS-T, and CCO-T remain our Top Picks. We believe investors are likely to look through any potential near-term results disappointment for these three companies, particularly given the focus on new project ramp-up for CS-T and TECK.B-T, and the broader uranium/nuclear thematic for CCO-T.”