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Bull of the Day

Gold prices have soared in 2016, from around $1060 per ounce in the beginning of the year to over $1300 per ounce in late July.  These increased prices are enabling gold mining companies to sell their products at a much higher price than previously envisioned.  This is why Goldcorp Inc. (GG - Analyst Report) is the Zacks Bull of the Day.

This Zacks Ranked #1 (Strong Buy) company has operations in Canada, the US, Mexico and Central and South America. Apart from gold, the company also produces copper and silver. The company's principal producing mining properties are the Red Lake, Porcupine and Musselwhite gold mines in Canada The Penasquito gold/silver/zinc/lead mine, the Pueblo Viejo gold mine (40% interest) in the Dominican Republic, the Los Filos and El Sauzal gold mines in Mexico the Marlin gold/silver mine in Guatemala the Alumbrera gold/copper mine (37.5% interest) in Argentina and the Marigold (66.7% interest) and Wharf gold mines in the United States. Goldcorp has significant development projects which include the Cerro Negro gold project in Argentina Eleonore and Cochenour gold projects in Canada, the El Morro gold/copper project (70% interest) in Chile and the Camino Rojo gold/silver projects in Mexico.

Recent Earnings Performance

In the first quarter of 2016, the company posted net earnings of $80 million compared to a net loss of $87 million in the year ago quarter.  Further, Goldcorp produced 783,700 ounces of gold, a +8.1% increase from the year ago quarter. 

Management’s Take

According to David Garofalo, President and CEO, “We delivered a solid first quarter of production at low all-in sustaining costs.  Eleonore and Cerro Negro continued their ramp-up with underground mine development advancing well at both assets.  With a focus on NAV per share accretion, we plan to drive further productivity improvements at current operations and to leverage our existing mining camps by advancing low capital intensity, high rate of return internal growth opportunities.”

Performance vs. the S&P 500

As you can see from the graph below, Goldcorp has been significantly outperforming the S&P 500 for the entirety of 2016.

Increasing estimates

Due to the surging price of gold, estimates over the past 30 days have increased for Q2 16, Q3 16, FY 16, and FY 17; Q2 16 rose from $0.03 to $0.04, Q3 16 improved from $0.07 to $0.10, FY 16 jumped up from $0.28 to $0.34, and FY 17 leaped up from $0.36 to $0.48. 

Bottom Line

As many global issues, like Brexit, Global Terror, and Negative Interest rates remain a concern to investors, they will continue to run to the safety of gold and other precious metals.  

Note: Goldcorp announces Q2 16 earnings results on Wednesday July 27, after the market closes.  Currently, the Zacks Consensus Earnings estimate stands at $0.04 per share, and the Zacks Consensus Revenue estimate is expected to come in at $898 million. 

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