Kinross Gold (KGC) Down 20.8% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Kinross Gold (KGC). Shares have lost about 20.8% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Kinross Gold due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Kinross' Q4 Earnings Top Estimates, Revenues Up Y/Y

Kinross swung to a profit of $521.5 million or 41 cents per share in fourth-quarter 2019 from a loss of $27.7 million or 2 cents in the year-ago quarter. The bottom line in the reported quarter was supported by non-cash (after-tax) impairment reversals worth $293.6 million.

Barring one-time items, adjusted earnings were 13 cents per share, up from a penny per share a year ago. It also topped the Zacks Consensus Estimate of 10 cents.

Revenues climbed roughly 27% year over year to $996.2 million on higher average realized gold prices.

Full-Year Results

For 2019, earnings were 57 cents per share, compared with a loss of 2 cents per share a year ago. Adjusted earnings for the year were 34 cents per share, up from 10 cents a year ago, driven by increased margins.

Revenues were $3,497.3 million for the full year, up around 9% year over year, supported by higher gold prices.

Operational Performance

Attributable gold production was 645,344 ounces in the reported quarter, up around 6% year over year. Production was driven by record quarterly production at the Tasiast mine as well as higher production across Round Mountain and Bald Mountain.

Average realized gold prices were $1,485 per ounce in the quarter, up 21% from the year-ago quarter.

Production cost of sales per gold equivalent ounce was $744 in the quarter, essentially flat year over year. All-in sustaining cost per gold equivalent ounce sold rose 9% year over year to $1,050.

Margin per gold equivalent ounce sold was $741 in the fourth quarter, up 53% year over year.

Financial Review

Adjusted operating cash flow jumped nearly three-fold year over year in the fourth quarter to $387.6 million. Cash and cash equivalents were $575.1 million at the end of 2019, up around 65% year over year.

Long-term debt was $1,837.4 million at the end of the year. Notably, the company has no scheduled debt maturities until September 2021.

Capital expenditure increased roughly 9% year over year to $298.2 million in the fourth quarter. For the full year, capital expenditure rose around 6% year over year to $1,105.2 million, mainly due to higher spending on projects at Bald Mountain, Fort Knox and Round Mountain.

Outlook

Kinross expects production of around 2.4 million (+/- 5%) gold equivalent ounces for 2020. The modest expected decline in production from the 2019 level (of around 2.5 million) is mainly due to care and maintenance at the Maricunga mine and expected lower production at Paracatu, partly offset by an anticipated higher production at Tasiast and Fort Knox.

The company expects production to be relatively flat on a quarter-over-quarter basis through 2020, with a modest rise in the fourth quarter.

All-in sustaining costs are forecast to be $970 (+/- 5%) per gold equivalent ounce for 2020. The company also expects 2020 production cost of sales of $720 (+/- 5%) per gold equivalent ounces.

Capital expenditure for 2020 is projected to be roughly $900 million (+/- 5%).

How Have Estimates Been Moving Since Then?

It turns out, estimates revision flatlined during the past month.

VGM Scores

At this time, Kinross Gold has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Kinross Gold has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.

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