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A month has gone by since the last earnings report for Royal Gold (RGLD). Shares have lost about 0.3% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Royal Gold due for a breakout? 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 catalysts.
Royal Gold Q2 Earnings Surpass Estimates, Up Y/Y
Royal Gold 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.
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%.
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.
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.
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%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -7.87% due to these changes.
Currently, Royal Gold has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Royal Gold has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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