The share price of Franco-Nevada Corp. (FVN) rose 3.5% to $99.10 in extended trading on Monday following the release of third-quarter financial and operating results after the closing bell.
The Toronto-based gold royalty and stream company topped forecasters' expectations on adjusted earnings per share and revenue. The adjusted earnings per share was a record 54 cents (up 86.2% year over year) versus estimates of 45 cents per share. Third-quarter revenue came in at a record of $235.7 million in 2019 compared to $170.6 million in 2018 and projections of $223.73 million.
Third-quarter revenue was generated by gold and gold equivalents business (84.1%) and by energy business (15.9%). Gold and gold equivalents revenue derived from gold for 64.1%, silver for 10.1% and Platinum Group of Metals for 7.3%. Other mining assets contributed 2.6%. Energy revenue came from oil, gas and natural gas liquids.
Franco-Nevada also reported new records in total sales volume of equivalent gold of 133,219 ounces (up 11%) and in adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization of nearly $193 million, or $1.03 per share (up 43%).
Record results were achieved thanks to a new stream of gold and silver coming from the Cobre Panama asset, which began commercial production in September earlier this year, and the contribution from the newly acquired Marcellus energy royalty. Marcellus is located in an area between southwestern Pennsylvania and north-central West Virginia.
Franco-Nevada said that the ongoing ramp-up of Cobre Panama and further development of energy assets will feed future production growth. Moreover, operators of mineral assets on claims where Franco-Nevada claims its royalties and streams are intensifying exploration and mineral assets development activities underpinning future production.
Looking ahead to full-year 2019, Franco-Nevada targets gold equivalent near 500,000 ounces sold and energy revenue close to $115 million.
Additionally, the Canadian gold and silver royalty and stream company intends to maintain producing assets in its portfolio according to a 4:1 precious metal to energy ratio.
The existence of several bullish factors is guiding analysts towards higher expectations for precious metals prices in the next quarters. These factors include geopolitics and low yield environments globally. Also, an insufficient supply of gold in relation to the demand will provide extra fuel for the gold price rally. Gold is the main income source for Franco-Nevada.
The share price of Franco-Nevada should benefit from higher production and commodities prices. Analysts recommend an overweight rating for shares of Franco-Nevada, indicating that the stock is expected to beat most competitors. Analysts have also produced price targets averaging $100.64 per share, which reflects a 5.1% upside from Monday’s closing price of $95.75.
The share price of Franco-Nevada increased 57% in the past year through Nov. 11 to place above the 200-, 100- and 50-day simple moving average lines.
The stock has a market capitalization of $18 billion and a 52-week range of $62.80 to $101.19. The forward dividend yield is 1.05% as of Monday.
Disclosure: I have no positions in any securities mentioned.
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