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Where Might Goldcorp Be Headed after 1Q16 Results?

Where Might Goldcorp Be Headed after Its 1Q16 Results?

1Q16 results

Goldcorp (GG) reported its 1Q16 results on April 28, 2016. It held its conference call the same day to discuss the results. The company reported EPS (earnings per share) of $0.10, which was higher than consensus expectations of $0.04. While other operational results were in line, lower depreciation led to the beat. The company maintained its full-year targets for production and costs.

Looking at cost optimization and savings, Goldcorp announced a savings target of $250 million annually to be achieved beginning in 2018. It’s expected to be achieved through a mix of operational, capital, and other cost cuts.

Relative price underperformance

The Market was generally happy with Goldcorp’s results and the optimistic management tone. The stock rose 6.1%. In comparison, the Market Vectors Gold Miners ETF (GDX) rose 4.5%.

Year-to-date, Goldcorp’s stock price has risen 60% on an absolute basis. However, on a relative basis, it has underperformed its peers. Barrick Gold (ABX), Kinross Gold (KGC), Newmont Mining (NEM), and Yamana Gold (AUY) have risen 126%, 174%, 79%, and 138%, respectively, as of April 28, 2016. Agnico-Eagle Mines (AEM) and Goldcorp have had similar price performances YTD.

Goldcorp disappointed the Market last time with its production guidance pullback. But since it’s a low-cost producer with a strong balance sheet, its leverage to gold prices is lower than its peers, leading to underperformance.

Series overview

In this series, we’ll see how Goldcorp’s future prospects are looking based on its recent 1Q16 earnings and management’s comments. We’ll look at the company’s production and cost performances. We’ll do this in an effort to interpret how the company’s management is trying to position itself within the context of this volatile gold price environment.

In the next part of this series, we’ll take a look at Goldcorp’s 2016 growth in production as seen through its 1Q16 results.

Continue to Next Part

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