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Wheaton (WPM) Up 40% in a Year: What's Driving the Rally?

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Zacks Equity Research
·4 min read
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Shares of Wheaton Precious Metals Corp. WPM have rallied 39.9%, over the past year, compared with the industry’s growth of 24.6%, while the S&P 500 has gained 16.8%. Higher precious metal prices as well as continued focus on acquiring high-quality accretive metals have contributed to this rally.

Wheaton has a market cap of $19.1 billion. The company has an expected long-term earnings per share growth rate of 5%.



Let’s delve deeper and analyze the factors driving the stock.

Driving Factors

Wheaton is benefiting from the strong rebound of mine production following the pandemic-induced temporary suspensions of some operations in the second quarter. The company expects mining operations to continue without any major interruptions. Its long-term production forecast remains unchanged at 750,000 GEOs per year on average between 2020 and 2024.

Wheaton is poised to gain from mine exploration and expansion activities by their operators. Last October, Vale S.A VALE invested in the Salobo III mine expansion, wherein 62% expansion was complete at the end of third-quarter 2020. The Salobo expansion is scheduled to commence in the first half of 2022. This will enhance the mine’s throughput capacity to 36 million ton per annum (Mtpa) from the current level of 24 Mtpa. In the Stillwater mine, Blitz project will likely reach a steady state by 2024. Moreover, Wheaton’s Fill the Mill project at the East Boulder mine is right on schedule to be concluded by the end of this year. These expansion projects are anticipated to be growth drivers in the coming years.

Wheaton is focused on boosting its production capacity from high-quality accretive metals. It remains active on the corporate development front and is focused on growing high-quality portfolio of assets. Last month, Wheaton entered into a previously-announced precious metals purchase agreement with Caldas Gold Corp. to acquire 6.5% of the gold production and 100% of the silver production from the Marmato Project located in Colombia.

Recently, the company entered into an agreement with Capstone Mining Corp. to purchase silver stream from the latter’s Cozamin Mine. Per the agreement, Wheaton will purchase 50% of the mine’s silver production until 10 million ounces have been delivered. Following this, the company will purchase 33% of the silver production for the life of the mine. In fact, Wheaton's solid financial position, combined with available credit capacity, also provides flexibilities to acquire additional accretive precious metals.

The company generates its revenues primarily from the sale of gold, silver and palladium. Gold prices have been up 22.6% so far this year, fueled by the coronavirus pandemic. The combination of lower mined gold supply and higher demand, and geopolitical tensions are likely to drive prices north. This bodes well for Wheaton. Silver prices have also flared up 41.9%, year to date, on recovery in industrial activities as governments continue relaxing the restrictions. Given the bullish precious metal markets and high-quality portfolio of assets, Wheaton is focused on creating sustainable value for shareholders.

Positive Growth Projections

The Zacks Consensus Estimate for Wheaton’s current-year earnings is currently pegged at $1.17, indicating a year-over-year surge of 108.9%. The same for 2021 earnings is pinned at $1.68, suggesting year-over-year growth of 44.2%.

Zacks Rank & Other Stocks to Consider

Wheaton currently carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the basic materials space are Bunge Limited BG and Rayonier Advanced Materials Inc. RYAM. While Bunge sports a Zacks Rank #1 (Strong Buy), Rayonier Advanced Materials carries a Zacks Rank of 2, at present.  You can see the complete list of today’s Zacks #1 Rank stocks here.

Bunge has a projected earnings growth rate of 43% for the current year. The company’s shares have gained around 18.1% in a year’s time.

Rayonier Advanced Materials has an estimated earnings growth rate of 92% for 2020. Over the past year, the stock has soared nearly 164%.

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VALE S.A. (VALE) : Free Stock Analysis Report
 
Bunge Limited (BG) : Free Stock Analysis Report
 
Rayonier Advanced Materials Inc. (RYAM) : Free Stock Analysis Report
 
Wheaton Precious Metals Corp. (WPM) : Free Stock Analysis Report
 
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