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Bear of the Day: Silver Wheaton (SLW)

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With gold and silver prices falling off a cliff in 2013, it's not surprising that earnings estimates are being cut for the miners. Silver Wheaton Corporation (SLW), one of the largest streaming metals companies in the world, is no exception. 10 earnings estimates for 2013 have been cut in the last 2 months, sending the consensus plunging for the year.

Silver Wheaton is not a mining company but streams the precious metals. That means it enters agreements where it has the right to purchase all or part of the gold or silver production from mines around the world.

The payment is up front, which means its costs are mainly fixed. It doesn't actually do the exploration or have to deal with employee issues like union contracts. It looks for politically stable regions.

Based upon current agreements, the company has forecast 2013 production of 33.5 million silver equivalent ounces and 145,000 ounces of gold. Silver Wheaton expects to grow production to 53 million silver equivalent and 180,000 ounces of gold by 2017.

It doesn't hedge its gold or silver production.

Misses the Zacks Consensus in Q1

On May 10, Silver Wheaton reported first quarter results and missed the Zacks Consensus by 4 cents. Earnings were 37 cents compared to the Zacks Consensus of 41 cents.

The analysts had overestimated the sales of the metals. Silver sales were down 19% quarter over quarter with gold sales down 49%.

However, revenue managed to edge up 3% to $205.8 million.

Changes Dividend Policy to Stabilize Payout

Along with its earnings report, Silver Wheaton also announced changes to its dividend payout policy. The dividend will now be calculated based on 20% of operating cash flows of the previous 4 quarters versus calculating it based only on the prior quarter.

Shares are currently yielding 2.3%.

Investors Fleeing the Stock

Silver Wheaton is a Zacks Rank #5 (Strong Sell) and that's exactly what investors have been doing: selling. However, all of the silver and gold stocks have been getting crushed as the precious metal prices decline.

Shares are now trading with a P/E of just 12. However, the analysts aren't too optimistic about the earnings outlook for 2013. In the last 2 months, the 2013 Zacks Consensus has fallen to $1.69 from $2.01 a share. The analysts now expect earnings growth of just 2.5% this year.

Want to Own a Silver Miner?

There's not a lot of options if you're looking for an alternative among the silver miners.

Nearly all of them are Zacks Rank #4 (Sell) or Zacks Rank #5 (Strong Sell). However, Hecla Mining (HL - Free Report) has managed to hold onto its Zacks #3 (Hold) ranking even though 2013 estimates have been cut in half for it as well.

It's a tough time to be an investor in the precious metal miners and streaming companies. The short-term earnings outlook is awful.

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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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