Franco-Nevada Corp. (FNV, Financial) closed the first quarter of 2017 with earnings per share of 25 cents, an increase from adjusted EPS of 17 cents in the comparable quarter of 2016. The company beat analysts’ expectations by three cents, generating a positive surprise of 13.6%. Estimates ranged between a low of 17 cents and a high of 26 cents.
Source: Yahoo Finance
Revenue came in at $172.7 million, a substantial increase from $132 million in the first quarter of 2016. The company met expectations.
Source: Yahoo Finance
In the first quarter, the company sold 131,578 ounces of gold equivalent, a 23.4% increase from the comparable quarter of the previous year. The gold royalty and streaming company achieved a new record in the volume of gold sold. Franco-Nevada generated $119.8 million in cash flow from operations and approximately $58 million in free cash flow, after having deducted $61.9 million for investing activities.
Since the company is debt-free, its free cash flow was used to upgrade its assets in the Americas, Africa, Southeast Europe and Australia, and to distribute dividends to shareholders. The board of directors decided to increase the quarterly dividend by 4.5% to 23 cents per share from the previous dividend of 22 cents per share. This marks the company's 10th consecutive annual dividend increase. Based on the current share price of $67.87, the annual dividend is now 92 cents for a dividend yield of 1.4%.
The dividend will be paid on June 29 to shareholders of record as of June 15.
In the first quarter, the company paid $30.1 million in dividends to shareholders. The miner has approximately 178.48 million shares outstanding, of which 175.17 million is float.
Investing in Franco-Nevada gives investors the opportunity to shield their portfolio from inflation through the exposure to precious metals, which usually represents between 85% to 90% of the company’s total business, while limiting exposure to many of the risks associated with operating companies.
The royalty and streaming company is also engaged in the oil and gas industry, but it only represents a small portion of its total business. The company hopes to further increase its presence in the oil and gas industry as a way of preserving its business from the negative impacts of diminishing mineral resources.
At the end of the quarter, the company had $283 million in cash and securities, a 11.9% increase from the previous quarter. The company can raise the funds needed to enhance the quality of its asset base from a $1 billion line of unsecured credit with maturity in March 2022.
Analysts recommend holding this stock with a recommendation rating of 2.9. The average price target is $70.90 per share. The price ranges between a low of $60 per share and a high of $80 per share.
The stock is trading at 2.92 times its book value and 24.33 times its EBITDA.
During the first quarter, First Eagle Investment (Trades, Portfolio) increased its position in Franco-Nevada by 1.70%.
Disclosure: I have no positions in Franco-Nevada Corp.
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