Goldcorp Underperformed GDX: Why?
Goldcorp Underperforms, yet Shows Strong Future Outlook
Share performance comparison
Goldcorp (GG), a Canada-based gold producer, underperformed the Market Vectors Gold Miners ETF (GDX) YTD (year-to-date). On November 5, 2015, Goldcorp’s stock fell 35% YTD while GDX fell only 26%. Goldcorp reported a drastic fall in its net earnings in 9M15 due to lower realized prices and higher production costs. Major peers Barrick Gold Corporation (ABX) and Kinross Gold Corporation (KGC) also fell, by 33% and 35% YTD, respectively, while Newmont Mining Corporation (NEM) fell only 10%. Barrick and Newmont recorded better 9M15 results than Goldcorp. The SPDR Gold Trust ETF (GLD), which tracks the performance of gold prices, fell only 7% YTD.
Goldcorp’s 9M15 performance analysis
Goldcorp’s revenue rose 27% from $2.6 billion in 9M14 to $3.3 billion in 9M15 due to higher gold revenues. However, Goldcorp’s net earnings fell a whopping 52% from $235 million in 9M14 to $113 million in 9M15, primarily due to higher production costs and increased depreciation and depletion. However, the company maintained its 2015 guidance of production and capital expenditure.
Series outlook
In this series, we’ll analyze the future prospects of Goldcorp. We’ll analyze gold production, major mines’ production, gold costs, leverage, and liquidity. At the end of this series, we’ll discuss analysts’ ratings and valuation.
Investors can get exposure to gold through gold-backed ETFs and investment in gold mining companies. Major gold-backed ETFs are the SPDR Gold Trust ETF (GLD) and the Market Vectors Gold Miners ETF (GDX). Goldcorp has the highest holding in GDX, with 7.5%.
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