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Franco-Nevada (FNV) Q2 Earnings Top, Revenues Miss Estimates

Zacks Equity Research

Franco-Nevada Corporation FNV reported adjusted earnings of 48 cents per share in second-quarter 2020, up 41.2% from the prior-year quarter. Additionally, the bottom line surpassed the Zacks Consensus Estimate of 46 cents.

The company generated revenues of $195 million in the reported quarter, reflecting a year-over-year improvement of 14%. The top-line figure, however, missed the Zacks Consensus Estimate of $216 million. In the reported quarter, 92.5% of revenues were sourced from gold and gold equivalents (69.9% gold, 10.3% silver, 11% platinum group metals and 1.3% from other mining assets) and 7.5% from energy (oil, gas and natural gas liquids).

The company sold 104,330 Gold Equivalent Ounces (GEOs) in the quarter, down from the prior-year quarter’s 107,774 GEOs. This year-over-year decline of 3.2% resulted due to lower contributions from the Antapaccay, Goldstrike and Sabodala mines, offset by higher contributions from Cobre Panama and Hemlo.

During the reported quarter, adjusted EBITDA increased 14.5% to $158 million year over year.

In second-quarter 2020, the average gold price was $1,711 per ounce, 30.6% higher than the year-ago quarter’s. Silver prices averaged $16.38 per ounce in the quarter, up 10% year over year. Platinum prices went down 6.2% year over year to $790 per ounce, while palladium prices jumped 41.6% year over year to $1,965 per ounce.

FrancoNevada Corporation Price, Consensus and EPS Surprise

FrancoNevada Corporation Price, Consensus and EPS Surprise
FrancoNevada Corporation Price, Consensus and EPS Surprise

FrancoNevada Corporation price-consensus-eps-surprise-chart | FrancoNevada Corporation Quote

Financial Position

The company had $378.5 million cash in hand as of Jun 30, 2020, up from the $132.1 million reported as of Dec 31, 2019. It recorded operating cash flow of $345.4 million in the first half of the current year, up from $262.7 million in the first half of 2019.

Franco-Nevada is debt free and uses its free cash flow to expand the company’s portfolio and pay dividends. The company’s board has announced a quarterly dividend of 26 cents per share, payable on Sep 24 to shareholders of record as of Sep 10, 2020.


Franco-Nevada has initiated the ongoing-year guidance.

The company now expects attributable royalty and stream sales between 475,000 GEOs and 505,000 GEOs from its mining assets, and revenues of $60-$75 million from energy assets in 2020. The WTI oil price and Henry Hub natural gas price are assumed to average $40 per barrel and $2.00 per mcf, respectively.

Franco-Nevada has a diversified portfolio of 56 producing assets, out of which 15 witnessed experienced temporary production curtailment in the June-end quarter due to the coronavirus pandemic. All mining assets resumed operations except Golden Highway. The return to normal operations of its mining assets and higher gold prices will likely contribute to the company’s results through the rest of this year. Moreover, the company is poised to benefit from longer-term organic growth from its more than 240 exploration and development royalties owing to availability of increased capital to the gold sector. Franco-Nevada’s energy assets are expected to benefit from stabilized oil and gas prices.

Price Performance

Franco-Nevada’s shares have appreciated 63.1% over the past year, outperforming the industry’s growth of 52.7%.

Zacks Rank & Stocks to Consider

Franco-Nevada currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the basic materials space are Coeur Mining Inc. CDE, Commercial Metals Company CMC and The Scotts MiracleGro Company SMG, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Coeur Mining has an expected earnings growth rate of a whopping 138.7% for 2020. The company’s shares have surged 70% over the past year.

Commercial Metals has a projected earnings growth rate of 15% for the current year. The company’s shares have gained 34% in a year’s time.

Scotts MiracleGro has an estimated earnings growth rate of 44.5% for the ongoing year. Its shares have appreciated 43% in the past year.

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