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Bear of the Day: Gold Fields (GFI)

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It's tough being a gold miner in 2013. Gold prices have slid to 8 month lows. Many miners are also having trouble getting the yellow metal out of the ground. Gold Fields Limited (GFI - Free Report) , a South African miner, recently provided disappointing 2013 production guidance which sent earnings estimates tumbling. It's a Zacks Rank #5 (Strong Sell).

Gold Fields is an unhedged gold producer with 6 operating mines in Australia, Ghana, Peru and South Africa. Four other projects are ongoing.

Even if gold prices are elevated, a gold miner doesn't make money without getting it out of the ground. A whole host of things can impact production from natural disasters to geopolitical risks to power outages due to poor infrastructure.

In the fourth quarter of 2012, Gold Fields suffered from major strikes. Gold production fell 7% in the quarter due to the strikes.

Another Miss In The Fourth Quarter

Gold Fields doesn't have a good track record of beating the Zacks Consensus and it proved that again in the fourth quarter as it missed for the fifth time in a row. The strikes didn't help as it missed by 36%.

But what was most disappointing was the production guidance. Gold Fields provided the full year range of just 1.825- 1.9 million oz. That is under the company's normal production level of around 2.1 million oz. and under the analyst estimates for the year.

2013 Estimates Tumble

With gold prices sliding, it looks like darker days are ahead. The analysts certainly think so as the 2013 Zacks Consensus Estimate had been cut to $1.26 from $2.09 in just the last 90 days.

That still means some earnings growth in 2013 of 9.9% as the company made $1.15 last year but that is far below what analysts had hoped to happen this year.

A Value Play?

Gold Fields trades with a forward P/E of just 6.3. That seems cheap.

But in its end of the year presentation, Gold Fields provided the following chart depicting how poorly the large gold mining company shares have done since 2006 compared to owning the physical metal. Gold Fields shares have under performed even the other major miners.

High gold prices don't guarantee big profits for the gold miners. Gold Fields is expected to have a difficult 2013.

Those interested in commodities companies should look in another direction.

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Tracey Ryniec is the Value Stock Strategist for She is also the Editor of the Turnaround Trader and Value Investor services. You can follow her on twitter at @TraceyRyniec.

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