Why Is Barrick (ABX) Down 2.8% Since the Last Earnings Report?

A month has gone by since the last earnings report for Barrick Gold Corporation ABX. Shares have lost about 2.8% in that time frame, underperforming the market.

Will the recent negative trend continue leading up to the stock’s next earnings release, or is it 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 catalysts.

Barrick's Earnings, Revenues Miss Estimates in Q1

Barrick reported net earnings (attributable to equity holders) of $679 million or $0.58 per share for first-quarter 2017, as against the year-ago loss of $83 million or $0.07.

Barring one-time items, adjusted net earnings were $0.14 per share for the quarter, missing the Zacks Consensus Estimate of $0.24. Higher adjusted net earnings reflect the impact of higher gold and copper prices, partly offset by higher depreciation, higher exploration and evaluation expenses, and slightly higher direct mining costs.

Revenues rose roughly 3.3% year over year to $1,993 million in the reported quarter, but missed the Zacks Consensus Estimate of $2,177 million.

Cost of sales rose roughly 1.3% year over year in the quarter.

Operational Highlights

Total gold production was 1.31 million ounces in the reported quarter, up 2.3% from 1.28 million ounces a year ago. Average realized price of gold rose 3.3% year over year to $1,220 per ounce in the first quarter. All-in sustaining costs (AISC) increased to $772 per ounce in the reported quarter from $706 per ounce a year ago.

Copper production decreased to 95 million pounds in the quarter from 111 million pounds in the prior-year quarter. Average realized copper price was $2.76 per pound in the quarter, up from $2.18 per pound a year ago.

Financial Position

Cash and cash equivalents were $2,277 million at the end of first quarter, down roughly 4.7% year over year.

Barrick reduced total debt by $178 million in the first quarter and the company now has less than $100 million debt due before 2019. The company plans to reduce its total debt by $2.9 billion to $5 billion by the end of 2018, half of which have been targeted in 2017. Also, out of $7.8 billion of outstanding debt, roughly $5 billion will not mature until 2032.

In April, the company announced the sales of 50% interest in Veladero mine in Argentina to Shandong Gold for roughly $960 million. A significant portion of the proceeds from this deal will be used to reduce debt.  

Guidance

For 2017, Barrick anticipates gold production in the range of 5.30–5.60 million ounces, down from previous range of 5.60–5.90 million ounces. The reduction in forecast is partly due to anticipated sale of 50% interest of Veladero, which is expected to close at the end of the second quarter.

Cost of sales applicable to gold has been forecasted in the range of $780–$820 per ounce for the year, which remains unchanged from previous figure. The company maintains previous forecast figure for all-in sustaining cost of $720–$770 per ounce for 2017.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month. There have been two upward revisions for the current quarter compared to two downward. In the past month, the consensus estimate has shifted downward by 14.2% due to these changes.

Barrick Gold Corporation Price and Consensus

 

Barrick Gold Corporation Price and Consensus | Barrick Gold Corporation Quote

VGM Scores

At this time, Barrick's stock has an average Growth Score of 'C', though it is lagging a lot on the momentum front with an 'F'. However, 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 'C'. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate that the stock is more suitable for value investors than growth investors.

Outlook

The stock has a Zacks Rank #3 (Hold). We are looking for an inline return from the stock in the next few months.

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