Three Gold Majors: Earnings Previewhttps://www.thestreet.com/story/10736042/1/three-gold-majors-earnings-preview.html?puc=_tscrss
NEW YORK (TheStreet) --By TheStreet Staff
04/26/10 -11:04 AM EDT
Majorgold producers Newmont Mining(NEM), BarrickGold(ABX) and Goldcorp(GG)are scheduled to announce their first quarter results this week onApril 26, April 28 and April 28, respectively.
Sales of all three companies areexpected to increase during the quarter in the range of 35% - 56% yearover year and 0.3% - 13.1% quarter over quarter. However, Newmont andBarrick Gold will likely be the winners over Goldcorp.
Earnings per share ofNewmont and Barrick gold are expected toincrease by 33.3% and 92.5% year over year, while earnings per share ofGoldcorp is expected to plunge by 32.5% year over year. In addition,Newmont and Barrick Gold are currently trading at EV to EBITDA multiplesof 6.40 and 8.45 whereas Goldcorp is trading at a multiple of 15.78.
During the first quarter, Newmont Mining, Barrick Gold andGoldcorp gained around 12.2%, 2.74% and 2.7%, respectively, compared to5.26% gain in gold spot prices on the New York Mercantile Exchange overthe same period.
Newmont Mining
Newmont is the second largest gold producer in the world and has beenfocusing on optimizing existing operations, while evaluating newprojects during the past few years. Gross margins of the company havegradually increased from 46% in 2005 to 57% in 2009.
Analysts polled by Bloomberg estimate the company to reportearnings of 77 cents per share on sales of $2,151 million during thefirst quarter this year, compared to earnings of 40 cents per share onsales of $1,441 million and $1.13 per share on sales of $2,086 millionin the first and fourth quarters of 2009, respectively.
Gold and copper, which respectively account for 88% and 12% ofthe company's revenue, have witnessed a 5.68% and 5.26% gain, during thefirst quarter. This will likely enable the company to post strongprofits this season.
Earnings before interest, taxes, depreciation and amortization isexpected to increase 83.8% to $1,101 million from $599 million for thefirst quarter of 2009 and 6.5% from $1,034 million for the fourthquarter of 2009.
The company expects to produce 5.3 - 5.5 million ounces of goldfor 2010 at an average cost of $450 - $480 per ounce. Newmont has theadvantage of mines located closer to India and China, two major goldconsumers. The Asia Pacific region is expected to account for 44% ofNewmont's production.
The company has the lowest EV to EBITDA ratio of 6.45 among majorgold producers, in comparison with Barrick Gold's 8.45, Goldcorp's15.79, Kinross Gold's(KGC) 10.62 and Agnico-Eagle Mines' (AEM) 13.73.
The stock has nine buy, nine hold, and one sell ratings, as perTheStreet's Analyst ratings guide.
Barrick Gold
This stock is among the
three precious metals we picked for this earningsseason. On Friday, UBS recommended Barrick Gold on the back ofuncertainty over new projects with other gold companies. Industryexperts reckon Barrick Gold to have one of the strongest pipelines.
Analysts polled by Bloomberg estimate the company reportingearnings of 56 cents per share on revenues of $2.4 billion, compared to42 cents per share on revenues of $1.8 billion during the year-agoperiod.
Earnings before interest, taxes, depreciation and amortization isexpected to zoom 72.5% to $1280 million from $742 million for the firstquarter of 2009 and 19.0% from $1076 million for the fourth quarter of2009.
Profit margin of Barrick Gold is expected to reach 53.4% duringthe quarter, in comparison to 41.9% and 45.4% margins registered for thefirst and fourth quarters of 2009.
The stock has 16 buy, seven hold, and one sell ratings, as perthe TheStreet's Analyst ratings guide.
Goldcorp
After registering
gold production of 2.42 million ounces during 2009,the company appears to be on track for another record production,supported by expansion in production at Penasquito mine, which isconsidered to be the most important Mexican mine for the next twodecades.
During the first quarter of 2010, analysts consider the company tohave made good progress through its flagship Penasquito mine in Mexico.Gold production during the quarter was around 30,700 ounces and themanagement anticipates the mine to yield 180,000 ounces during thecurrent year.
A second mill line at this mine is on track to commenceoperations during the third quarter this year. Currently, even with justone mill line and without high-pressure rolls, Penasquito is one of thebiggest precious metals mines in the world.
Cash costs of Goldcorp continue to be among the lowest in theindustry. Total cash costs were $289 per ounce on a by-product basis,and $422 per ounce on a co-product basis for 2009. Newmont Miningreported total cash cost per gold ounce at $352 and $468, respectively.The leader in gold production, Barrick Gold, reported a total cash costof $466 an ounce.
Analysts polled by Bloomberg expect the company to reportearnings of 27 cents per share, compared to earnings of 40 cents pershare and 9 cents per share in the first and fourth quarters of 2009,respectively.
The stock has 13 buy, seven hold, and one sell ratings, as perTheStreet's Analyst ratings guide.