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Bear of the Day: Agnico Eagle Mines (AEM)

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With the chances of a rate hike later this month rising to a near certainty-- and especially after the most recent jobs report-- it has been an extremely tough time for commodities. A variety of natural resources have been pinned down by a firm dollar, while precious metals in particular have been under pressure thanks to widespread speculation that the Fed won’t fall too far behind the curve this time.

This is leading to some brutal trading for the miners, with gold miners struggling in this environment almost across the board. And with the prospect of more rate hikes on the horizon, the future doesn’t look very bright either. That is why investors should probably consider avoiding miners right now, and especially considering that the industry has a bottom 20% industry rank these days.

But if investors are looking for a potential short candidate in this group, they might want to take a closer look at Agnico Eagle Mines (AEM - Free Report) , as this company could be in trouble in the weeks ahead thanks to its poor fundamentals.

AEM in Focus

Agnico is coming off a pretty horrific earnings report in which the company posted earnings of just two cents per share compared to estimates of 14 cents per share. This is the first such miss for AEM since 2014, but as we can see in the chart below, it is pretty rare for AEM to only miss once and get back on track.

Analysts have also been slashing their estimates for Agnico stock, as the current quarter consensus estimate has fallen from 41 cents a share 30 days ago, to just 17 cents a share today. We have also seen a huge move lower for the current year, as this figure has collapsed from $1.18/share 30 days ago, to just 43 cents per share today. AEM is actually expected to see earnings decline this year when looking at year-over-year figures, so it isn’t a pretty picture for Agnico investors.

Furthermore, AEM has pretty weak figures from a fundamental perspective too. In addition to an ‘F’ score for Momentum, the company also has an ‘F’ grade for value, thanks in part to its forward PE which is over 90. These figures help to give the company an overall fundamental score of a ‘D’, which combines pretty poorly with its Zacks Rank #5 (Strong Sell). Clearly, investors can do better than AEM at this time.

Other Choices

If investors are looking for other opportunities in the basic material market, they are in luck. The basic materials space actually has a top 20% Sector Rank, so there are several solid choices out there.

In particular, the mining-iron industry is worth discussing, given its top 10% industry rank. One name that stands out in this group is Cliffs Natural Resources (CLF - Free Report) , as this company has a Zacks Rank #2 (Buy), and a VGM Score of ‘A’ as well.

This could make CLF a much better choice over Agnico Eagle Mines for investors in the materials market right now, at least until AEM can turn things around from its fundamental and earnings estimate perspectives.

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