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Alberto Abaterusso
Alberto Abaterusso
Articles (2604) 

Agnico Eagle Mines Plunges

Agnico Eagle beat consensus on fourth quarter earnings and revenues

February 18, 2018 | About:

Agnico Eagle Mines closed the fourth quarter of fiscal 2017 with an amazing reversal from fiscal 2016 fourth quarter to a net profit of 21 cents per share on a revenue of $565.25 million (up 13.2% on prior-year quarter), thanks to a higher price the Canadian miner realized from the sale of one ounce of gold and a higher gold sales volume.

However, the gain could have progressed even more if Agnico Eagle Mines wouldn’t have incurred in higher mine sites costs at Meadowbank, Kittila, Pinos Altos and La India.

Agnico Eagle Mines beat consensus on adjusted EPS by 2 cents, producing a 10.50% positive surprise. Concerning revenue, analysts expected this to have come in at $557.08 million and the discrepancy generated a 10.50% positive surprise.

For the same reasons the operating cash flow increased as well on a year over year basis and by 38.4% to approximately $167 million in fiscal 2017 fourth quarter.

The fourth quarter of 2017 closed a year that for Agnico Eagle Mines has been remarkable according to Sean Boyd, Chief Executive Officer of Agnico Eagle Mines:

"In 2017, we had another strong year of operating performance exceeding our production forecast and beating our cost guidance for the sixth consecutive year. We set a new annual production record while recording the fewest number of lost time accidents, and we also increased our gold reserves".

Source: Agnico Eagle's News Release

However, the stock unexplainably plunged 4.43% to $43.10 on Friday Feb. 16 at market close. Perhaps it was under the influence of a general collapse that we have witnessed on the gold stock industry, as illustrated in the below chart of Yahoo Finance, where you can clearly see this sign in the fall of the VanEck Vectors Gold Miners ETF (GDX).

Source: Yahoo Finance

One thing is sure, following this flop, Agnico Eagle Mines is trading more cheaply than a few days ago opening an incredible opportunity to step into one of the best options to gain exposure to gold miners.

Source: Yahoo Finance

Agnico Eagle Mines is trading again below the 50 and the 100-SMA lines and with a share price which is about $2.5 below the midst of a $39.30 to $51.86 per share 52-week range.

The current market valuation bears a 30% appreciation of the gold stock to an average target price of $56.03 per share.

Helped by a favourable commodity environment, the catalyst of an expected growth in the reserve base of the miner increases the chances to have Agnico Eagle’s share price falling into the $56.03 to $65 per share price target range within the following 52 weeks of trading.

For full fiscal of 2018, Agnico Eagle Mines predicts gold production at 1.53 million ounces versus a previous guidance of 1.5 million ounces. While AISC is seen at a $890 to $940-ounce range.

(Disclosure: I have no positions in Agnico Eagle Mines Limited.)

About the author:

Alberto Abaterusso
I am a contributor at GuruFocus. I primarily write about how to pick potential value stocks. Gold, silver and precious metals mining industries is also my cup of tea. My articles have also been widely linked by popular sites, including MarketWatch, Financial Times, 24hGold, Investopedia, Financial.org, CNBS, MSN Money, Zachs, Reuters and others. I hold a Master\\\'s Degree in Business Administration from Università degli Studi di Bari (Italy), Aldo Moro. I am based in The Netherlands.

You can follow me on Twitter at https://twitter.com/AAbaterusso

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