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Gold prices were supported by a weaker U.S dollar and inflation in first-quarter 2018. The Fed’s rate hikes also aided gold prices which declined prior to its implementation in March but experienced gains thereafter. Further, Trump administration slapped a 25% tariff on steel imports and a 10% tariff on aluminum imports which triggered fears of a trade war and in turn helped gold prices prop up.
Another development that rattled global markets was Trump’s appointment of John Bolton, who is considered a foreign policy “hawk”, as National Security Advisor. Bolton had previously advocated using military force against both North Korea and Iran. In fact, Bolton’s appointment is a clear indication of the United States’ aggressive stance toward its adversaries. The increasing geopolitical tensions added to the uncertainty increasing the safe haven appeal of gold. This bolstered the gold prices in the quarter under review.
All these recent developments and resulting volatility will continue to fuel gold prices as investors will shun risk assets such as equities and instead turn to gold. There are also plenty of reasons to be optimistic about gold’s performance this earnings season and the rest of 2018. A number of new mines entered production in fourth-quarter 2017, which might support mine production till 2018. On the demand side, major markets, India and its neighbor China will continue to be growth drivers.
Last year, the Indian market had suffered a setback due to the impact of imposition of Good and Service Tax (“GST”) and anti-money laundering legislation (“AML”) around jewelry retail transactions. We expect it to bounce back as the market adapts to GST. Pent-up demand as well as festive buying is anticipated to boost demand for jewelry in the country. Moreover, government measures like mandatory hallmarking in 2018 is likely to be a positive for the industry. Further, the United States continues to be a strong market driven by economic growth, improving employment levels and growth in consumer confidence.
Overall Earnings Picture Looks Good
Per the Zacks Industry classification, the gold mining industry is grouped under the Basic Material sector — one of the 16 broad Zacks sectors. The sector is currently placed at the top 19% out of the 16 Zacks sectors, and one of the sectors which is expected to record double-digit earnings growth. According to our latest projections, the sector is anticipated to log an earnings growth of 41.0% in first-quarter 2018 on the back of 19.8% rise in revenues.
The overall earnings picture for all the S&P500 members is encouraging this quarter. Total earnings for the S&P 500 index are expected to be up 18.3% for this earnings season on the back of a 7.7% rise in revenues. If this materializes, it would surpass fourth-quarter 2017 results where the S&P 500 recorded 13.4% earnings growth on 8.6% revenue growth — the best quarterly performance in more than six years.
Let’s see what’s in store for the gold miners that are set to report quarterly numbers on Apr 26.
Newmont Mining Corporation NEM is one of the world's largest producers of gold with several active mines in Nevada, Peru, Australia/New Zealand and Ghana. The company is set to report first-quarter 2018 results before the opening bell. The company’s adjusted earnings came in line with the Zacks Consensus Estimate in the last reported quarter. Newmont has beaten the Zacks Consensus Estimate in three of the trailing four quarters, with a positive average earnings surprise of 21.47%.
Newmont Mining Corporation Price and EPS Surprise
Newmont Mining Corporation price-eps-surprise | Newmont Mining Corporation Quote
Newmont Mining’s Zacks Rank #3 (Hold), when combined with an Earnings ESP of +2.86%, makes us reasonably confident of an earnings beat this quarter.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Strong production performance (driven by sustained project investments) in the company’s Americas operations is expected to continue in the first quarter. However, Newmont faces headwinds from high production costs in 2018. (Read more: What's in the Cards for Newmont This Earnings Season?)
Agnico Eagle Mines, Ltd. AEM is engaged in the exploration, development and production of mineral properties in Canada, Finland, and Mexico. The company is anticipated to report first-quarter 2018 results after the market closes.
The company delivered a positive earnings surprise of 10.5% in the last reported quarter. It has an impressive average positive earnings surprise of 42.7% in the trailing four quarters.
Agnico Eagle Mines Limited Price and EPS Surprise
Agnico Eagle Mines Limited price-eps-surprise | Agnico Eagle Mines Limited Quote
The company's declining gold production is a concern. Moreover, all-in sustaining costs (AISC) are expected to increase through 2018. This may hurt the company’s margins in the to-be-reported quarter. Nevertheless, Agnico Eagle maintains a solid exploration budget and is reinvesting in its assets to expand output. It is making a good progress with its key growth projects and is also expanding mine life across a number of properties.
Agnico Eagle Mines’ Earnings ESP of +14.48% and Zacks Rank #3 makes us reasonably confident of an earnings beat this quarter.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Eldorado Gold Corp. EGO, a gold producing and exploration company with gold assets in Turkey, China, Greece, Brazil and Romania, will report first-quarter 2018 results after the closing bell. Eldorado Gold has a negative average earnings surprise of 66.67% in the trailing four quarters.
Eldorado Gold Corporation Price and EPS Surprise
Eldorado Gold Corporation price-eps-surprise | Eldorado Gold Corporation Quote
The Zacks Consensus Estimate for the first quarter is pegged at 1 cent, flat year over year. Eldorado’s Zacks Rank #3 when combined with an Earnings ESP of +200.00%, makes us reasonably confident of an earnings beat this quarter.
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