Kinross Gold (KGC) Up 17.3% Since Earnings Report: Can It Continue?

It has been more than a month since the last earnings report for Kinross Gold Corporation KGC. Shares have added about 17.3% in that time frame, outperforming the market.

Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Kinross Beats Earnings and Revenues Estimates in Q2

Kinross reported net profit of $33.1 million or 3 cents per share in second-quarter 2017 against a net loss of $25 million or 2 cents in the year-ago quarter.

Adjusted earnings (excluding one-time items) was $54.9 million or 4 cents per share, compared with the year-ago loss of $9.8 million or a penny per share. Adjusted earnings per share beat the Zacks Consensus Estimate of 2 cents per share.

Revenues of $868.6 million in the quarter fell around 0.9% from $876.4 million in the year-ago quarter owing to the slightly lower average realized gold price. However, revenues topped the Zacks Consensus Estimate of $826 million.

Operational Performance

Attributable gold production was 694,874 ounces for the quarter, up 3.5% year over year. Production cost of sales per gold equivalent ounce declined to $660 from $731 recorded in the prior-year quarter, primarily due to lower cost of sales per ounce at Round Mountain, Fort Knox, Bald Mountain and Tasiast. All-in sustaining cost per gold equivalent ounce sold fell to $910 from $988 a year ago.

Margin per gold equivalent ounce sold was $600 in the quarter, up 12.1% year over year.

Average realized gold prices fell to $1,260 per ounce in the quarter from year-ago recorded figure of $1,266.

Financial Review

Adjusted operating cash flow was $230.8 million, up 23% from $187.2 million in the prior-year quarter. Cash and cash equivalents were $1,061.3 million as of Jun 30, 2017, up from $968.2 million as of Jun 30, 2016.

Long-term debt was essentially flat year over year at $1,734.5 million. Capital expenditures rose to $200.7 million in the quarter from $114 million in the prior-year quarter due to Tasiast Phase One expansion project costs and higher spending at Paracatu and Bald Mountain.

Development Updates

Kinross continues to progress as planned with the Phase One expansion of the Tasiast mine and remains on track with its commercial production which is expected to begin in second-quarter 2018. The company expects Phase One to increase plant throughput to 12,000 t/d from 8,000 t/d. The company is also making a steady progress with the Tasiast Phase Two expansion feasibility study which is on schedule and is expected to be completed in September. Tasiast Phase Two expansion project is expected to extend mine life at one of Kinross' most consistent operations.

Kinross also continues to progress with detailed engineering work at the Vantage Complex in the South area at Bald Mountain. 

Kinross’ Russian development projects are in their advanced stages. The company has completed construction of surface infrastructure at the Moroshka project with decline development on schedule. Development of September Northeast project has been completed on time and on budget. Processing of ore from September Northeast satellite deposit at the Kupol mill started in Jun 2017.

Outlook

For 2017, Kinross reaffirmed its previous gold production guidance range of 2.5–2.7 million gold equivalent ounces. The overall production cost of sales is expected in the range of $660–$720 per gold equivalent ounce, while all-in sustaining cost is estimated to be $925–$1,025.

Kinross projects its capital expenditure to be roughly $900 million.

How Have Estimates Been Moving Since Then?

Following the release and in the last month, investors have witnessed a downward trend in fresh estimates. There has been one revision lower for the current quarter.

Kinross Gold Corporation Price and Consensus

 

Kinross Gold Corporation Price and Consensus | Kinross Gold Corporation Quote

VGM Scores

At this time, Kinross Gold's stock has a strong Growth Score of A, though it is lagging a bit on the momentum front with B.  The stock was also allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Based on our scores, the stock is more suitable for growth than value and momentum investors.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. The stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.

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