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Yamana (AUY) to Report Q2 Earnings: What's in the Cards?

Zacks Equity Research

Yamana Gold Inc. AUY is scheduled to release second-quarter 2019 results on Jul 25, after the closing bell.

The stock has gained 2.1% in a year’s time compared with the industry’s 36.6% rise.

Factors at Play in Q2

Earlier this month, Yamana announced preliminary operational results for the second quarter.

The company produced 257,556 gold equivalent ounces (GEO) in the second quarter. Per the company, production in the quarter surpassed expectations. Also, preliminary costs were within the previous guidance.

Preliminary gold production in the second quarter amounted to 232,863 ounces and silver production totaled around 2.2 million ounces. Copper production amounted to 31.2 million pounds.

The Zacks Consensus Estimate for Yamana’s second-quarter gold production is currently pegged at 235,000 ounces, indicating an expected year-over-year rise of nearly 5%.

Moreover, Yamana expects to deliver positive free cash flow in the second quarter, which is in line with previous projection.

In April 2019, Yamana announced the sale of the Chapada mine and closed the deal on Jul 5. Notably, the mine produced 29,019 ounces of gold in the second quarter.

Jacobina recorded its 11th consecutive quarter of more than 30,000 ounces of gold production in the second quarter. The mine is emerging as a leading operation for the company in terms of production, costs and safety. Moreover, the company stated that other major mines including the Canadian Malartic, El Penon and Cerro Moro delivered strong performance during the second quarter.

However, production in the Minera Florida was affected by lower productivity during the second quarter as the company negotiated new collective bargaining deals with several unions. Notably, it has reached on agreements with all unions.

During the quarter, Yamana also implemented corporate overhead reductions. It streamlined the organizational structure to reflect its current portfolio of assets. Per the company, these initiatives are likely to generate annualized savings worth $15 million, which will lower corporate overhead on a cash basis to $60 million per annum.

After witnessing turbulence in 2018, gold has had a stellar run this year with prices hitting a six-year high in June. Gold prices have surpassed the $1,400 an ounce threshold and traded at levels last seen in 2013. Uncertainties over the U.S.-China standoff, a weaker U.S. dollar and geopolitical tensions have boosted demand for gold so far this year. The yellow metal also benefited from the U.S. Federal Reserve’s dovish tone. Higher gold prices will likely lend support to the company’s earnings in the second quarter.

What the Zacks Model Says?

Our proven model does not show that Yamana is likely to beat estimates this quarter. This is because a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below:

Earnings ESP: Earnings ESP for Yamana is 0.00%. The Most Accurate Estimate and the Zacks Consensus Estimate are both currently pegged at 2 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Yamana currently sports a Zacks Rank #1, which when combined with a 0.00% ESP makes surprise prediction difficult. You can see the complete list of today’s Zacks #1 Rank stocks here.

Note that we caution against stocks with a Zacks Rank #4 (Sell) or #5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Yamana Gold Inc. Price and EPS Surprise

Yamana Gold Inc. Price and EPS Surprise

Yamana Gold Inc. price-eps-surprise | Yamana Gold Inc. Quote

Stocks Poised to Beat Estimates

Here are some companies in the basic materials space you may want to consider as our model shows that they have the right combination of elements to post earnings beat in the quarter to be reported:

Franco-Nevada Corporation FNV has an Earnings ESP of +3.62% and sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Barrick Gold Corporation GOLD has an Earnings ESP of +2.56% and carries a Zacks Rank #3.

Carpenter Technology Corporation CRS has an Earnings ESP of +0.27% and carries a Zacks Rank #3.

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