Shares of Franco-Nevada Corporation FNV have rallied 61.4% year to date compared with the industry’s growth of 45.5% and the S&P 500’s gain of 6.8%.
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Franco-Nevada has a market capitalization of $24.4 billion. Average volume of shares traded in the past three months was 946.7 million. The company has a long-term estimated earnings per share growth rate of 4%.
The company has surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average beat being 8.38%.
Let’s delve deeper and analyze the factors driving the stock.
Driving Factors
Franco-Nevada seems to be on a long-term growth trajectory aided by a healthy portfolio of streaming and royalty agreements put in place years ago. One of the inherent strengths of the company’s business model is portfolio diversification. Two of its assets, Candelaria and Antapaccay, contributed 12% each to 2019 revenues followed by Cobre Panama that accounted for 8%, making it a combined total of 32%.
Some of Franco-Nevada’s mining operators have been facing the unfavorable impact of the coronavirus outbreak, which includes temporary suspension of operations and production curtailment. Operations at Cobre Panama and Antamina have been temporarily suspended, while the Antapaccay and Candelaria mines continue to operate at normal levels. Franco-Nevada’s operator diversification will help negate the overall impact on its revenues.
Given its continued focus on cost management, Franco-Nevada continues to generate high margins. The cash costs per GEO (Cost of sales, less depletion and oil and gas costs, divided by gold equivalent ounces) was at $266 in 2019, witnessing a CAGR of 3% during the 2015-2019 period. During this time, its margins witnessed a CAGR of 5%.
Gold is considered as a safe-haven asset during times of economic uncertainties. Gold prices have been up 13.7% so far this year, fueled by the slowdown in manufacturing activity, rate cuts, geopolitical tensions, and apprehensions regarding the coronavirus pandemic. The Fed’s announcement to maintain interest rates near zero through 2022 to cushion the economy from the coronavirus-induced crisis has further flared up gold prices.
Franco-Nevada is financially strong and has a debt-free balance sheet. As of Mar 31, 2020, the company had available liquidity of $1.5 billion. Thus, Franco-Nevada is well-positioned to sail these troubled times and make investments to grow its diversified portfolio of assets.
Positive Growth Projection
The Zacks Consensus Estimate for the company’s current-year earnings is pegged at $2.17 per share, suggesting year-over-year growth of 19.2%. The same for 2021 is pinned at $2.60, indicating a year-over-year rise of 19.7%
Zacks Rank & Stocks to Consider
Franco-Nevada currently carries a Zacks Rank #2 (Buy).
Some better-ranked stocks in the Mining – Gold industry are Agnico Eagle Mines Limited AEM, B2Gold Corp BTG and Gold Fields Limited GFI. While Agnico Eagle sports a Zacks Rank #1 (Strong Buy), B2Gold and Gold Fields carry a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Agnico Eagle has an estimated earnings growth rate of 53.6% for the current year. The company’s shares have rallied 20.6% in the past year.
B2Gold has an expected earnings growth rate of 221.4% for ongoing year. Its shares have surged 80.7% in the past year.
Gold Fields has an expected earnings growth rate of 30.9% for 2020. The company’s shares have gained 47.8% in the past year.
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