Franco-Nevada Corp. (FNV, Financial) closed the fourth quarter of 2016 with earnings per share of 24 cents, an increase from EPS of 15 cents in the comparable quarter of 2015. The company beat analysts’ expectations by three cents and generated a positive surprise of 14.28%. Estimates ranged between a low of 19 cents and a high of 27 cents. Figures on earnings per share were adjusted for one-time charges.
Source: Yahoo Finance
For the last quarter of fiscal 2016, the company’s revenue came in at $155.53 million, a substantial increase from $121.3 million in the fourth quarter of 2015. The company beat expectations by $0.6 million.
Source: Yahoo Finance
In the fourth quarter of 2016, the company sold 121,910 ounces of gold equivalent, a 15% increase from the comparable quarter of the previous year.
Franco-Nevada closed full-year 2016 posting growth in adjusted profit and revenue, increases of 63.1% and 37.6% on a year-over-year basis. Net profit for the year, adjusted for one-time charges, was $164.4 million or 94 cents per share on the back of record revenue of $610.2 million.
The gold royalty and streaming company achieved a record in the volume of gold equivalent sold during the year. Franco-Nevada sold 436,383 ounces, 28% more than it sold the year before. In additon, the gold sold at a price 14% higher than in 2015.Ă‚
Almost 80% of the company's revenue comes from the sale of gold, which, in 2016, the price per ounce increased approximately 8% on a year-over-year basis. This price increase combined with the volume of gold sold helped Franco-Nevada improve its financial situation.
At the end of the quarter, the company had $253 million in cash on hand and securities, a 69.6% increase from the fourth quarter of 2015. The company profited from issuing new ordinary shares during the year. Franco-Nevada is debt free and can raise the funds needed to enhance the quality of its asset base from a $1 billion line of unsecured credit, whose maturity has been extended to March 2022.
Over the next several years, we will likely see Franco-Nevada continue to expand its portfolio to include more activities in the oil and gas industry in response to the depletion of gold mines. The weight of the oil and gas business in the company’s portfolio is currently negligible.
The net cash flow from operations was $471 million in 2016 versus $314.3 million in 2015. Franco-Nevada used approximately $630 million as capital expenditures during 2016 for the purchase of oil and gas equipment, properties, royalties and streams. During the year, Franco-Nevada made $883.5 million with the issuance of new equity.
The company pays a quarterly dividend of 22 cents to its shareholders for a dividend yield of 1.4%.
For 2017, Franco-Nevada says it “expects attributable royalty and stream production to total 470,000 to 500,000 GEOs from its mineral assets and revenue of $35 million to $45 million from its oil and gas assets.” In additon, it “estimates depletion expense of $265 million to $295 million.”
Franco-Nevada closed at $63.79 Wednesday, down 41 cents or -0.64% from the previous close. Franco-Nevada has a market capitalization of $11.58 billion and 178.25 million shares outstanding.
Analysts recommend to hold this stock with a recommendation rating of 2.9. The average price target is $69.90 per share. The price ranges between a low of $60 per share and a high of $80 per share.
The stock is trading at 2.71 times its book value and 25 times its EBITDA.Ă‚
Disclosure: I have no positions in Franco-Nevada Corp.
Start a free 7-day trial of Premium Membership to GuruFocus.
