IAMGOLD (IAG, Financial) reported decent results for the third quarter. Commodity prices are weak and the industry is struggling, but management delivered strong results across a number of key performance metrics. IAMGOLD has also taken many initiatives that are helping it maintain profitability even in a soft commodity market. The company is anticipating a rise in gold prices in the future.
Results and beyond
In the recently reported quarter, IAMGOLD’s revenue rose by 16.4% to $341.5 million also beating analysts’ estimates of $324.58 million. In the production, IAMGOLD’s production also rose by 9% to 225,000 ounces. While on the earnings front, the company managed to hit break-even consensus estimates of 4 cents a share by $0.04. Let us have a look at some of the strategic initiatives IAMGOLD is undertaking for future.
The industry is struggling with the soft commodity market. The leading companies on the stock are seeing headwinds and this is also affecting their performance on the exchange as well. But thing that is impressive about IAMGOLD is that the company is cautious about its operations and has succeeded in adjusting its performance according to the market which has helped it to stay better than other companies in the league.
The company thinks it to be a cyclical trend and is facing a downtrend as of now. But IAMGOLD is on guard and is taking impressive initiatives to stay competitive. It is now focusing on various initiatives to improve its profitability. IAMGOLD is working on its cost structure by reducing the costs by cutting back its capital spending and conserving cash.
Smart strategies
In the current soft gold environment, IAMGOLD will be reducing its activities including spending with the expansion and development. IAMGOLD is crystal clear about its objective of growing production and making them more cost efficient.
Moving on to the balance sheet of the company, IAMGOLD is impressive about its balance sheet. It managed to improve its cash position impressively by 42% in the past and is looking for further improvement in the cash position. In addition, the liquidity of the company is also strong at more than $1 billion, which is a good thing and can be a key point which can draw attention of many investors towards the stock.
According to the recent updates, IAMGOLD has also agreed to sell Niobec for $530 million. This is a wise move by the company as this sale will lead to further cash addition, making its balance sheet more attractive. The company can gain good market share in future on the back of it.
Further, Rosebel grades are also growing well and the company is optimistic about its improvement further in future. It is pleased with the operational performance by the company and seeing good cost control through reduced capital spending. With such a growth, IAMGOLD is expecting good cash flows in 2015. In addition, IAMGOLD finds great opportunities for reducing costs at Essakane. It is focusing specially on optimizing mining and milling processes. It is expecting similar contribution to its financial performance by Essakane as it is seeing with Rosebel.
IAMGOLD is focused on enhancing its profile by developing a great pipeline of projects such as Boto in Senegal. With this, the company is estimating to produce about 1.1 million ounces of gold at the initial levels which will also contribute to better results of the company.
Conclusion
Now moving to the fundamentals of the stock, the company is on its break-even so it doesn’t reflect a trailing P/E but the being on break-even in this soft commodity market is an impressive thing for the company while the forward P/E of 99.33 indicates strong growth in the earnings in the near term. As the gold prices are expected to increase in future, the stock’s earnings growth might be disappointing in the long term. Its earnings are growing at CAGR of 3.00% which is poor as compared to the industry average of 21.57%. All these aspects indicates that IAMGOLD is a good pick as of now but for the long term, the investors should consider other profitable stocks for their portfolio.
