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Gold Mining Q1 Earnings Mixed: ETFs Gain on Fundamentals

Sanghamitra Saha

Gold miners are likely coronavirus beneficiaries as VanEck Vectors Gold Miners ETF GDX added about 20.4% past month (as of May 8, 2020), breezing past the S&P 500 ETF’s (IVV) 5.5% gains. In comparison, gold bullion ETF GLD advanced about 1%. The sector comes from a favorable Zacks industry(placed at the top 4% of total 250+ industries in the Zacks universe).

The Fed’s super-dovish stance since March and the resultant moderate strength in the greenback, a mammoth government stimulus, uptick in investor sentiment, lower oil prices, cheaper valuation and relatively low debt of mining companies facilitated this spectacular performance (read: 5 Reasons Why Gold Mining ETFs & Stocks Have More Room to Run).

Gold mining companies are better positioned than they’ve been in 10-20 years with low operating costs, healthy balance sheets, and attractive valuations, as per investment management firm VanEck.

The industry has a debt/equity ratio of 0.02x versus 0.75x of IVV. Current ratio of 2.55x versus IVV’s 1.24x also points toward the sound liquidity position of the gold mining industry. Valuation wise, mining industry has a forward P/E ratio of 12.91x versus 19.85x of IVV (read: Sector ETFs to Win or Lose on Oil Collapse).

Against this scenario, let’s take a look at how gold mining stocks have performed so far this reporting season. Notably, last week was packed with gold mining earnings releases.

Inside Earnings Releases

Barrick Gold Corporation GOLD recorded net earnings (on a reported basis) of 22 cents per share in first-quarter 2020, up from 6 cents in the year-ago quarter. Barring one-time items, adjusted earnings per share increased 45.5% year over year to 16 cents. The figure came in line with the Zacks Consensus Estimate. Barrick recorded total sales of $2.721 billion, up around 30% year over year. The figure missed the Zacks Consensus Estimate of $2.745 billion.

Wheaton Precious Metals Corp. WPM reported adjusted earnings of 22 cents per share in first-quarter 2020, beating the Zacks Consensus Estimate of 21 cents. The bottom line surged 68.8% year over year. The company’s revenues of $255 million in the reported quarter were up 13.2% on a year-over-year basis. Also, the top line outpaced the Zacks Consensus Estimate of $251 million.

Royal Gold Inc. RGLD reported adjusted earnings per share of 68 cents in third-quarter fiscal 2020 (ended Mar 31, 2020), beating the Zacks Consensus Estimate of 58 cents. The company had reported earnings per share of 42 cents in the prior-year quarter. The company generated revenues of $136 million, up 24.3% year over year. However, the top line missed the Zacks Consensus Estimate of $141 million.

Kinross Gold Corporation KGC logged earnings of 10 cents per share in first-quarter 2020, up from 5 cents in the year-ago quarter. Results benefited mainly from higher margins, which were partly offset by higher income tax expense. The figure also topped the Zacks Consensus Estimate of 8 cents. Revenues rose 11.9% year over year to $879.8 million, partly supported by higher average realized gold prices.

Newmont Corporation NEM reported earnings of $1.04 per share in first-quarter 2020, up from 21 cents in the year-ago quarter. Barring one-time items, adjusted earnings were 40 cents per share that missed the Zacks Consensus Estimate of 43 cents. Revenues of $2.581 billion were up 43.2% year over year. However, the figure missed the Zacks Consensus Estimate of $2.683 billion.

ETFs in Focus

All the stocks mentioned above have a considerable focus on VanEck Vectors Gold Miners ETF. Investors can also bet on other gold mining ETFs like iShares MSCI Global Gold Miners ETF RING, Sprott Gold Miners ETF SGDM and US Global Go Gold and Precious Metal Miners ETF GOAU to gain access to the aforementioned stocks. The stocks and ETFs all gained last week, reflecting earnings results and solid industry fundamentals.

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Kinross Gold Corporation (KGC) : Free Stock Analysis Report
 
Newmont Corporation (NEM) : Free Stock Analysis Report
 
Barrick Gold Corporation (GOLD) : Free Stock Analysis Report
 
SPDR Gold Shares (GLD): ETF Research Reports
 
Royal Gold Inc (RGLD) : Free Stock Analysis Report
 
Sprott Gold Miners ETF (SGDM): ETF Research Reports
 
VanEck Vectors Gold Miners ETF (GDX): ETF Research Reports
 
iShares MSCI Global Gold Miners ETF (RING): ETF Research Reports
 
US Global GO GOLD and Precious Metal Miners ETF (GOAU): ETF Research Reports
 
Wheaton Precious Metals Corp (WPM) : Free Stock Analysis Report
 
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