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Agnico Eagle (AEM) Up 27% in 3 Months: What's Driving it?

Zacks Equity Research

Shares of Agnico Eagle Mines Limited AEM have gained 26.9% in the past three months compared with the industry’s 21% growth and the S&P 500’s 1.4% rise.

The company has a market cap of around $15.4 billion. Average volume of shares traded in the past three months was nearly 2,345.1K. The company has an expected earnings per share (EPS) growth rate of 75.3% for 2020.

Let’s delve into the factors that are driving the stock.

Driving Factors

Solid first-quarter 2020 results, bright prospects of key growth projects and higher gold prices contributed to the company’s share price appreciation.

Agnico Eagle’s adjusted earnings per share of 23 cents for first-quarter 2020 topped the Zacks Consensus Estimate of 18 cents.

The company’s revenues rose 26.2% year over year to $671.9 million. Payable gold production also rose 3.3% year over year to 411,366 ounces in the reported quarter.

Agnico Eagle is making a good progress with its key growth projects and is also expanding mine life across a number of properties. The company is ramping production at Meliadine, which produced 238,394 ounces of gold in 2019. It expects improved production and cost performance at Meliadine through 2020.

The company, in April, also restarted its Quebec operations including the Canadian Malartic, which is the largest operating open-pit gold mine in Canada. Agnico Eagle is ramping up the mining activities at Canadian Malartic. Ramp up of activities at Canadian mines are expected to position it strongly in the second half of 2020.

The Kittila expansion is also expected to increase mine efficiency and lower operating costs of the company. With the expected completion of the shaft and mill expansion at Kittila in late 2021, the annual gold production is expected to increase in 2022 and beyond.

Also, gold has been the bright spot in first-quarter 2020 as fears over the coronavirus pandemic has made it the most attractive safe-haven asset. A slump in crude oil prices, a low interest rate environment and geopolitical tensions also triggered demand for gold. In March 2020, surged past the $1,700 an ounce level for the first time in seven years on the virus crisis and a sharp decline in oil prices triggered by Saudi Arabia's price war with Russia. 

Earnings estimate revisions also make a great impact on stock prices. The Zacks Consensus Estimate for earnings for Agnico Eagle has moved up in the past month. Over this period, earnings estimates for the second quarter have moved up 26.7%, while the same for 2020 advanced 9.7%.

Agnico Eagle Mines Limited Price and Consensus

Agnico Eagle Mines Limited Price and Consensus
Agnico Eagle Mines Limited Price and Consensus

Agnico Eagle Mines Limited price-consensus-chart | Agnico Eagle Mines Limited Quote

acks Rank & Other Key Picks

Agnico Eagle currently sports a Zacks Rank #1 (Strong Buy).

Some other top-ranked stocks in the basic materials space are The Scotts Miracle-Gro Company SMG, Royal Gold, Inc. RGLD and Franco-Nevada Corporation FNV, all carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Scotts Miracle-Gro has an expected earnings growth rate of 17.7% for fiscal 2020. The company’s shares have surged 22.2% in the past year.

Royal Gold has an expected earnings growth rate of 67.6% for fiscal 2020. Its shares have returned 50.5% in the past year.

Franco-Nevada has an expected earnings growth rate of 20.3% for 2020. The company’s shares have surged 79.3% in the past year.

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