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Why Is Royal Gold (RGLD) Down 3.3% Since Last Earnings Report?

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It has been about a month since the last earnings report for Royal Gold (RGLD - Free Report) . Shares have lost about 3.3% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Royal 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.

Royal Gold Earnings Beat Estimates in Q4, Up Y/Y

Royal Gold reported adjusted earnings per share of $1.04 in fourth-quarter fiscal 2021, beating the Zacks Consensus Estimate of 93 cents. The bottom line also surged 96%, year over year, aided by outstanding performance of the company’s operating portfolio and continued robust metal prices.

Including one-time items, the company reported earnings per share of $1.24 compared with the prior-year quarter’s 75 cents.

The company generated record revenues of $168 million, reflecting year-over-year growth of 40%. Stream revenues were up 33.3% year over year to $114.4 million and royalty revenues climbed 57% to $54 million year over year. Gains from upbeat gold, silver and copper prices, higher gold stream sales from Andacollo mine, improved copper stream sales from Mount Milligan as well as higher royalty revenue primarily from Peñasquito, Cortez and Voisey’s Bay mines contributed to the top-line performance during the quarter. These were partly offset by lower gold sales from Mount Milligan and lower silver sales from Pueblo Viejo. The top-line figure, however, missed the Zacks Consensus Estimate of $169 million.

The company’s cost of sales came in at $25 million in the fiscal fourth quarter, up from the prior-year quarter’s $21 million.

General and administrative expenses amounted to $7 million, up 11% year on year. Adjusted EBITDA was $135 million in the reported quarter, up 46% year over year. Adjusted EBITDA margin expanded to 80.3% compared with the year-ago quarter’s 77%.

Financial Position

Net cash from operating activities was $121 million in the fiscal fourth quarter compared with the prior-year quarter’s $92 million. Royal Gold ended fiscal 2021 with $226 million cash in hand, down from the $319 million held at the end of fiscal 2020. Royal Gold is now debt free and has available credit facility of $1.2 billion.

Other Updates

Khoemacau Copper Mining Limited (KCM) stated that the Khoemacau Project (Khoemacau) produced the first copper silver concentrate from the Boseto process plant on Jun 30. The project is currently undergoing commissioning activities and the first shipment of concentrate was made in mid-July 2021. KCM expects to ramp up through the balance of calendar-year 2021 and reach full production in early 2022. Royal Gold holds the right to receive 84% of the payable silver produced from this project.

On Aug 6, Royal Gold closed the gold stream purchase agreement with Ero Gold Corporation’s NX Gold Mine. Per the agreement, Royal Gold will purchase 25% of the mine’s gold production until 93,000 ounces have been delivered and 10%, thereafter. It will make payments for 20% of the gold spot price for each ounce delivered until the delivery of 49,000 ounces and thereafter, pay 40% of the spot gold price. Royal Gold made an advance payment of $100 million upon closing the deal. It will make an additional $10 million of further payments from the beginning of calendar-year 2022 through the end of calendar-year 2024.  

Fiscal 2021 Performance

Royal Gold reported adjusted earnings per share of $3.59 in fiscal 2021, up 45% year over year. The bottom line surpassed the Zacks Consensus Estimate of $3.54. Including one-time items, the company reported earnings of $4.60 compared with $3.03 in fiscal 2020.

The company’s revenues improved 23% year over year to a record $616 million, beating the Zacks Consensus Estimate of $607 million.  Increase in the average gold, silver and copper prices on a year-on-year basis and a jump in production within the royalty segment drove this upbeat performance.

Outlook

For the quarter ended Sep 30, 2021, Royal Gold expects stream segment sales between 62,000 and 67,000 GEOs (Gold Equivalent Ounces). Inventory at the end of the reported quarter is projected to range between 22,000 and 27,000 GEOs.

For the period ended Dec 31, 2021, Royal Gold expects stream segment and royalty sales volume to range between 175,000 and 185,000 GEOs. Depreciation, depletion and amortization expense is estimated to be $520-$570 per GEO.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month.

VGM Scores

At this time, Royal Gold has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. 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 this revision indicates a downward shift. Notably, Royal Gold has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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