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Royal Gold (RGLD) Q2 Earnings Surpass Estimates, Up Y/Y

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Royal Gold, Inc. RGLD reported adjusted earnings per share of 92 cents in second-quarter fiscal 2021 (ended Dec 31, 2020), beating the Zacks Consensus Estimate of 89 cents. The bottom line also improved 46% year over year aided by excellent performance by the company’s operating portfolio and continued robust metal prices.

Including one-time items, the company reported earnings per share of 91 cents compared with the prior-year quarter’s 63 cents.

The company generated record revenues of $158 million, reflecting year-over-year growth of 28%. Stream revenues increased 20% year over year to $108 million, while royalty revenues surged 49% to $51 million year over year. Gains from higher gold, silver and copper prices, and an increase in production within the royalty segment led to improved revenues in the quarter.

The company’s cost of sales was up 18% year over year to $25 million in the fiscal second quarter, primarily on year-over-year increases in gold, silver and copper prices.

Royal Gold, Inc. Price, Consensus and EPS Surprise

Royal Gold, Inc. Price, Consensus and EPS Surprise
Royal Gold, Inc. Price, Consensus and EPS Surprise

Royal Gold, Inc. price-consensus-eps-surprise-chart | Royal Gold, Inc. Quote

General and administrative expenses amounted to $7 million, up 2% year on year. Adjusted EBITDA was $127 million in the reported quarter and adjusted EBITDA margin was 80%.

Financial Position

Net cash from operating activities was around $100 million in the fiscal second quarter compared with the prior-year quarter’s $78 million. Royal Gold ended the reported quarter with $382 million cash in hand, up from the $319 million held at the end of fiscal 2020.

At the end of the reported quarter, the company’s total debt was $196 million, down from the $300 million recorded at the end of fiscal 2020. As of Dec 31, 2020, Royal Gold had $800 million available and $200 million outstanding under the revolving credit facility. Working capital, combined with available capacity under the revolving credit facility, resulted in approximately $1.2 billion of total liquidity as of Dec 31, 2020.

Subsequently, on Jan 4, 2021, the company repaid $50 million of the outstanding borrowings under the revolving credit facility. After this repayment, the amount available under the revolving credit facility was $850 million.

During the reported quarter, the company hiked its annual dividend by 7% to1.20 per share — the 20th consecutive annual increase.

Other Updates

The company stated that the Khoemacau Project (“Khoemacau”) reached approximately 85% of construction completion as of Dec 31, 2020. On Jan 6, 2021, Royal Gold made the sixth advance payment of $32.6 million. This brings the total contribution to $212 million and completes the advance payment required to earn the full base silver stream.

Outlook

For third-quarter fiscal 2021 Royal Gold expects stream segment sales between 48,000 and 53,000 GEOs (Gold Equivalent Ounces). Inventory at the end of the quarter is expected to range between 26,000 and 31,000 GEOs.

For fiscal 2021, depreciation, depletion and amortization expense is expected to be $590-$640 per GEO, and the effective tax rate is expected to range between 19% and 23%.

Price Performance

Over the past three months, shares of Royal Gold has fallen 14.0% compared with the industry’s decline of 20.4%.

Zacks Rank & Stocks to Consider

Royal Gold currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the basic materials space are Fortescue Metals Group Limited FSUGY, BHP Group BHP and Impala Platinum Holdings Limited IMPUY.

Fortescue has a projected earnings growth rate of 75.5% for the current fiscal. The company’s shares have surged around 41% in the past three months. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

BHP has an expected earnings growth rate of 59.5% for the current fiscal. The company’s shares have gained around 34% in the past three months. It currently flaunts a Zacks Rank #1.

Impala has an expected earnings growth rate of 189.4% for the current fiscal. The company’s shares have rallied around 34% in the past three months. It currently sports a Zacks Rank #1.

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