Goldcorp Inc. (GG, Financial) will release operating and financial results for the second quarter of fiscal 2017 after the market closes on July 26.
For the quarter, analysts forecast Goldcorp will post EPS of nine cents on average, which is based on 17 estimates of analysts who were surveyed. These estimates range between a loss of nine cents per share and a high of 16 cents per share. The forecast represents a 1,000% increase from the same quarter a year ago.
Source: Yahoo Finance
Revenue is expected to come in at $883.37 million. This figure is an average of seven estimates of analysts who were surveyed and represents a 17.30% increase from the comparable quarter of 2016. The estimates ranged between $816 million and $1.04 billion.
Source: Yahoo Finance
According to my method of estimating Goldcorp’s earnings per share for quarter, which is explained in a previous article, the Canadian miner is going to exceed expectations, producing a positive surprise of approximately 90%. This result is supported by the fact Goldcorp is gradually improving its gold margin per ounce of metal sold by lowering its all-in sustaing cost (AISC) per ounce. This is in line with Goldcorp’s strategy to increase gold production and reserves by 20% by the end of 2021 and decrease costs by 20%.
Therefore, my estimate is in line with those of analysts (compare the chart above with the first chart on earnings estimates).
Keep in mind my calculations do not consider the production and sale of silver and copper, which together account for less than 15% of the miner’s total revenue. If the sales of these metals were also considered, I would expect a variation of between one cent and 1.5 cents for EPS.
The difference between what I expect and what Goldcorp will report on earnings may have a significant impact on the market value of this gold stock.
Goldcorp is currently trading around $13.43 per share with a market capitalization of $10.7 billion, a price-book (P/B) ratio of 0.85, a price-sales (P/S) ratio of 3.10, a price-earnings Ă‚ (P/E) ratio of 45.99 and an EV/Ebitda ratio of 9.53.
The analysts' average target price per share of $17.27 represents a nearly 29% upside from the current market value per share.
The current recommendation rating for Goldcorp is 2.6 out of a total of 5. The Canadian gold stock has received four upgrades and one downgrade over the last 12 months. The downgrade occurred July 24 and was set by National Bank Financial, who decreased its rating on Goldcorp from outperform to sector perform.
As of the most recent quarter, Goldcorp had $212 million in cash and securities and total debt of $2.83 billion, for a total debt-equity ratio of 20.79 versus an industry average of 50.07. The interest coverage ratio is 2.15 versus an industry average of -0.90.
GuruFocus gives Goldcorp a financial strength rating of 5 out of 10 and a profitability and growth rating of 6 out of 10.
Another metric I like to consider when evaluating gold mining companies is the EVO metric, which measures the enterprise value of the gold company to one ounce of mineral reserves.
According to the chart above, Goldcorp is currently the most expensive with a value of $341.87.
Disclosure: I have no positions in any stock mentioned in this article.
