It has been about a month since the last earnings report for Kinross Gold (KGC). Shares have lost about 2.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Kinross 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 its most recent earnings report in order to get a better handle on the important drivers.
Kinross’ Q2 Earnings Beat Estimates, Revenues Up Y/Y
Kinross logged a profit of $195.7 million or 15 cents per share in second-quarter 2020, up from $71.5 million or 6 cents per share reported in the year-ago quarter. Results benefited mainly from higher operating earnings and a non-cash impairment reversal of $48.3 million at Lobo-Marte, which were partly offset by higher income tax expenses. Earnings also beat the Zacks Consensus Estimate of 14 cents.
Revenues rose 20.2% year over year to $1,007.2 million, partly supported by higher average realized gold prices.
Operational Performance
Attributable gold production was 571,978 ounces in the reported quarter, down 11.8% year over year. The downside was mainly due to lower production at Round Mountain, Paracatu and Chirano, which was partly offset by higher production at Bald Mountain and Kupol.
Average realized gold prices were $1,712 per ounce in the quarter, up 31% from the year-ago quarter figure.
Production cost of sales per gold equivalent ounce was $725 in the quarter, up 9.3% year over year. All-in sustaining cost per gold equivalent ounce sold rose 6.4% year over year to $984.
Margin per gold equivalent ounce sold was $987 in the quarter, up 53% year over year.
Financial Review
Adjusted operating cash flow jumped 45% year over year in the second quarter to $416.9 million. Cash and cash equivalents were $1,527.1 million at the end of the second quarter, up 221.2% year over year.
Long-term debt was $2,671.6 million at the end of the reported quarter, up 41.3% year over year. Notably, the company has no scheduled debt maturities until September 2021.
Outlook
Kinross, in April, withdrew its full-year guidance on account of the global uncertainties created by the coronavirus pandemic. The company believes that the decision is prudent, considering the significant impact of the pandemic on the global economy, commercial activities and global health, and further potential business disruptions.
Nevertheless, the company stated that it is on track to meet its original guidance of production, cost of sales per ounce, all-in sustaining cost per ounce and capital expenditure for 2020.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
VGM Scores
At this time, Kinross Gold has a nice Growth Score of B, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren’t focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions looks promising. Notably, Kinross Gold has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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