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Franco-Nevada Rises on 3rd-Quarter Results

- By Alberto Abaterusso

Franco-Nevada Corp. (FNV) closed 1.66% higher at $65.51 per share on the New York Stock Exchange on Nov. 6 after releasing results for the third quarter.

The Toronto-based gold royalty and stream company topped consensus on earnings and revenue.

Franco-Nevada closed the quarter reporting non-GAAP earnings of 29 cents per share and GAAP earnings of 28 cents per share, while consensus was for non-GAAP earnings of 26 cents per share and GAAP earnings of 25 cents per share.

Revenue came in at $170.6 million, a 0.5% decline from the prior-year quarter. Analysts projected revenue of $159.2 million.

The miner sold 120,021 ounces of equivalent gold for an average price of $1,203.12 per ounce and earned $26.2 million in royalties from the oil and gas business. In 2017, the company placed 123,787 ounces of gold equivalent on the market at $1,284.46 per ounce.

The percentage from precious metals and other mine assets, about 84.6% of total third-quarter revenue, decreased 9.2% on a year-over-year basis but it is expected to increase in 2019 as the Cobre Panama enters its ramp-up stage and as soon as the Candelaria operation in Chile is back to normal. Gold contributed 64.8% to total revenue from precious metals, silver gave 12% and platinum group metals accounted for 5.3%.

Nearly six-sevenths of total revenues were sourced from mineral assets located in the Americas; North America produced 39% and South America produced 43.7%.

The percentage from the oil and gas assets, about 15.4% of total third-quarter revenue, increased 109.6% on a year-over-year basis thanks to the extra contribution of royalties from the SCOOP and STACK plays in the Anadarko Basin of Oklahoma, the Midland Basin in Texas, the Delaware Basin located between Texas and New Mexico and the Orion Basin in Alberta, Canada. Higher prices and payments from the Weyburn Basin in Saskatchewan also supported the increase in royalties from the oil and gas business.

As a result of the strong performance from the oil and gas business as well as steady operating costs and expenses, Franco-Nevada produced a 10.5% year-over-year increase in cash flow from operations to $128.2 million even though precious metal sales volumes and prices declined.

Adjusted earnings before interest, taxes, depreciation and amortization increased 0.45% to $134.7 million

Cash and cash equivalents declined to $76.9 million from the end of 2017. Franco-Nevada is a debt-free company.

The stock has a market capitalization of approximately $12.04 billion. After a 21% decline for the 52 weeks through Nov. 6, the share price is below the 200 and 100-day simple moving average lines but above the 50-day SMA line.

The price-book ratio is 2.61 versus an industry median of 1.74. The 52-week range is $58.26 to $86.06.

Franco-Nevada has declared a quarterly cash dividend of 24 cents per share. The distribution is in line with the previous payment and leads to a forward yield of 1.47%. The shareholders will be paid on Dec. 20. To benefit, the investor must be on the company's book no later than Dec. 6. The ex-dividend date is Dec. 5.

Disclosure: I have no positions in any securities mentioned in this article.

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This article first appeared on GuruFocus.