Why Is Kinross Gold (KGC) Down 9% Since Last Earnings Report?

It has been about a month since the last earnings report for Kinross Gold (KGC). Shares have lost about 9% in that time frame, underperforming 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 its most recent earnings report in order to get a better handle on the important drivers.

Kinross' Q1 Earnings Beat Estimates, Sales Up Y/Y

Kinross logged a profit of $122.7 million or 10 cents per share in first-quarter 2020, up from $64.7 million or 5 cents in the year-ago quarter. Results benefited mainly from higher margins, which were partly offset by higher income tax expense. The figure also topped the Zacks Consensus Estimate of 8 cents.

Revenues rose 11.9% year over year to $879.8 million, partly supported by higher average realized gold prices.

Operational Performance

Attributable gold production was 567,327 ounces in the reported quarter, down 6.4% year over year. The downside was mainly due to lower production at Kupol, Paracatu and Chirano as well as the end of production at Maricunga, which were partly offset by higher production at Fort Knox.  

Average realized gold prices were $1,581 per ounce in the quarter, up 21% from the year-ago quarter’s figure.

Production cost of sales per gold equivalent ounce was $754 in the quarter, up 10.6% year over year. All-in sustaining cost per gold equivalent ounce sold rose 7.4% year over year to $993.

Margin per gold equivalent ounce sold was $827 in the quarter, up 33% year over year.

Financial Review

Adjusted operating cash flow jumped 81% year over year in the first quarter to $418.6 million. Cash and cash equivalents were $1,138.6 million at the end of the first quarter, up 179.8% year over year.

Long-term debt was $2,488 million at the end of the reported quarter, up 33% year over year. Notably, the company has no scheduled debt maturities until September 2021.

Outlook

Kinross has withdrawn its 2020 view in April although the coronavirus pandemic did not have any material impact on its operations during the first quarter. The company believes that this decision is prudent considering the significant impact of the pandemic on global economy, commercial activities, global health and further potential business disruptions.  

Nevertheless, favorable foreign exchange rates and fuel prices are likely to provide some support and partly offset the company’s incremental costs stemming from contingency measures.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month. The consensus estimate has shifted 17.5% due to these changes.

VGM Scores

At this time, Kinross Gold has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top 20% 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

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise 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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