What Do Mixed Earnings Mean for Gold Mining ETFs?
The gold mining space has been a moderate performer in recent times. While rising rate speculation dulled the safe-haven demand for the yellow metal, some downbeat U.S. economic data points and the resultant dovishness in the Fed’s stance helped the space to hang on to decent gains in the year-to-date frame. This makes it more important to look at how the key companies in this field fared last quarter (read: Gold ETFs Awaiting Bullish Reversals in Second Half of 2017?).
Two gold mining companies Barrick Gold Corporation ABX and Goldcorp Inc. GG reported on July 26, after market close. While ABX came up with upbeat results, Goldcorp dampened investors’ mood by missing on the top line. However, Newmont Mining Corp NEM, which reported on July 25 before market open, was the star as it breezed past estimates on both counts by a wide margin. Let’s dig a little deeper (read: Gold Mining ETF Investing Guide).
Barrick Gold Q2 Earnings in Focus
Barrick Gold’s Q2 adjusted earnings per share of $0.22 beat the Zacks Consensus Estimate of $0.20 and grew from the year-ago quarter figure of $0.14 per share.
Revenues rose 7.4% year over year to $2.160 billion, beating the Zacks Consensus Estimate of $2.155 billion by a sliver. Average realized price of gold was almost flat in the quarter but copper prices rose 21.5%.
The company also reduced its gold production target, though the copper output guidance was maintained. The stock has gained about 3.1% since the release of earnings (as of July 27, 2017).
Goldcorp Q2 Earnings in Focus
The company’s Q2 adjusted earnings per share were $0.12 compared with the Zacks Consensus Estimate of $0.10. Revenues of $822 million, however, missed the Zacks Consensus Estimate of $863 million. Production at several sites fell short of expectations, as per the source. The stock lost about 4.5% since the release of earnings (as of July 27, 2017).
Newmont Q2 Earnings in Focus
Another gold mining giant, Newmont Mining reported second-quarter 2017 adjusted earnings of $0.46 per share, up from $0.29 a year ago. Earnings also surpassed the Zacks Consensus Estimate of $0.28.
Newmont's revenues of $1.875 billion increased 12% from $1.787 billion in the year-ago quarter owing to higher sales volumes and copper pricing. Revenues also topped the Zacks Consensus Estimate of $1.787 billion. Since the earnings release, the stock has gained about 7.5% (as of July 27, 2017).
ETF Impact
The aforementioned companies have considerable exposure in large-cap funds like VanEck Vectors Gold Miners ETF GDX, iShares MSCI Global Gold Miners RING, PowerShares Global Gold & Precious Metals PSAU and Sprott Gold Miners Exchange Traded Fund SGDM (see all precious metal ETFs here).
In PSAU, NEM (8.57%), ABX (7.71%) and GG (6.73%) take the top three positions. RING invests over 14% each in NEM and ABX, while GG takes 8.54%. In GDX also, ABX, NEM and GG take 10.22%, 9.47% and 6.07% share, respectively. SGDM puts about 13.53% and 4.44% in ABX.
Bottom Line
With mixed-to-upbeat earnings, now it remains to be seen if gold mining companies and the related ETFs can continue to tack on gains. The Fed was dovish in its July meet too but kept the doors open for asset rollback in the near term, given that the economy has started taking root. Then again, a lower inflationary outlook makes any aggressive policy tightening dicey (read: Gold Surges on Weak U.S. Inflation: ETFs in Focus).
Overall, though some glitches have started to appear lately in the gold mining space, the growth story is not over in our opinion. Investors can easily mitigate the weakness in GG by the strength in other mining stocks like NEM and ABX by investing in the afore-mentioned mining ETFs.
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VANECK-GOLD MNR (GDX): ETF Research Reports
SPROTT-GOLD MNR (SGDM): ETF Research Reports
ISHARS-M GL GLD (RING): ETF Research Reports
PWRSH-GLBL GOLD (PSAU): ETF Research Reports
Newmont Mining Corporation (NEM) : Free Stock Analysis Report
Barrick Gold Corporation (ABX) : Free Stock Analysis Report
Goldcorp Inc. (GG) : Free Stock Analysis Report
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