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Franco-Nevada (FNV) Hits 52-Week High: Is Further Upside Left?

Zacks Equity Research

Shares of Franco-Nevada Corporation FNV scaled a fresh 52-week high of $80.69 during the Jun 19 trading session, later retracing a bit to close trading at $80.51.

Franco-Nevada, a Zacks Rank #3 (Hold) stock, has a market cap of $14.96 billion. Over the last three months, its average volume of shares traded has been approximately 468M. It has an expected long-term earnings per share growth rate of 4%.

Notably, the stock has appreciated 23.2% in a year’s time, higher than the S&P 500’s gain of around 7.3%.



 

Driving Factors

Performance of Oil & Gas remains robust, with revenues of $21 million recorded in the first quarter of 2019, up from the year-ago quarter’s $19 million. This stemmed from higher oil prices and increased production from the U.S. assets. During this period, energy revenues benefited from the company’s investment in the Royalty Acquisition Venture with Continental.

Last October, Franco-Nevada contributed $214.8 million to close its transaction with Continental Resources, Inc., in order to acquire the Oil & Gas mineral rights in the SCOOP and STACK plays of Oklahoma.

The company has also committed, subject to satisfaction of agreed upon development thresholds, to spend up to $300 million over the next three years to acquire additional mineral rights through a newly-formed entity. Hence, the strategic relationship with Continental Resources brings new business-development opportunity for Franco-Nevada.

Franco-Nevada projects revenues between $70 million and $85 million from its energy assets in 2019, backed by stellar contribution from the previously-acquired U.S. assets and higher oil prices. Moreover, the company remains optimistic about attributable royalty and stream production to total 465,000-500,000 Gold Equivalent Ounces (GEOs) from its mining assets for the current year.

Franco-Nevada has completed its $1-billion commitment for the Cobre Panama project. The company forecasts milling operation at an annualized rate of 72 million tons per year, by the end of this year. It also expects this project to reach its mill throughput capacity of 100 million tons per year in 2023. For the ongoing year, the company anticipates to produce 20,000-40,000 ounces gold from the Cobre Panama project.
 
Also, the Candelaria mine operation is likely to benefit in the second half of 2019 from more than $1 billion in fleet purchases, stripping and development. The company forecasts improvement in gold and silver deliveries from Candelaria in the second half of 2019.

Furthermore, Franco-Nevada strives to generate revenues from precious metals over the long haul. With precious metals generating around 88.4% of revenues during the March-end quarter, the company has the flexibility to consider diversification opportunities outside of the precious metals’ space and increase exposure to other commodities while maintaining its long-term target. The company appears to be on a promising long-term trajectory backed by a sound portfolio of streaming and royalty agreements put in place years ago.

Positive Growth Projections: The Zacks Consensus Estimate for Franco-Nevada’s 2019 earnings is currently pegged at $1.31, reflecting expected year-over-year growth of 11.9%. The same for 2020 is pinned at $1.52, indicating a year-over-year rise of 16.2%.

Franco-Nevada Corporation Price and Consensus

Franco-Nevada Corporation Price and Consensus

Franco-Nevada Corporation price-consensus-chart | Franco-Nevada Corporation Quote

Stocks to Consider

A few better-ranked stocks in the Basic Materials space are Materion Corp. MTRN, Flexible Solutions International Inc. FSI and AngloGold Ashanti Ltd. AU, all currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Materion has an expected earnings growth rate of 27.3% for 2019. The company’s shares have gained 17.7% in the past year.

Flexible Solutions has an outstanding projected earnings growth rate of 342.9% for the current year. The company’s shares have soared 181.7% in a year’s time.

AngloGold has an estimated earnings growth rate of 90.6% for the ongoing year. Its shares have surged 95% in the past year.

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