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Royal Gold (RGLD) Down 6.2% Since Last Earnings Report: Can It Rebound?

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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 6.2% 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 the most recent earnings report in order to get a better handle on the important catalysts.

Royal Gold Q4 Earnings Top, Up Y/Y on Higher Prices

Royal Gold reported adjusted earnings per share of 53 cents in fourth-quarter fiscal 2020, beating the Zacks Consensus Estimate of 50 cents. Notably, the company had reported earnings per share of 44 cents in the prior-year quarter.

Including one-time items, the company reported earnings of 75 cents compared with 40 cents in the prior year quarter.

The company generated revenues of $120 million, up 4% year over year. While stream revenues declined 5% year over year to $86 million, royalty revenues were up 35% to $34 million year over year. Gains from higher average gold and silver prices, and higher royalty revenues primarily from Peñasquito and Cortez were negated by lower average copper price and reduced sales volumes from the stream segment, mainly gold stream sales volumes at Andacollo, Mount Milligan and Pueblo Viejo.

The company’s cost of sales were down 13% year over year to $21 million in the fiscal fourth quarter, primarily due to lower gold sales from Andacollo, Mount Milligan and Pueblo Viejo, partially offset by increased gold prices.

General and administrative expenses rose 3% to $7 million from the $6 million in the prior-year quarter. Adjusted EBITDA was $92 million, up from the $85 million in the year-ago period.

Financial Position

Net cash from operating activities was $341 million in the fiscal 2020 compared with the prior-fiscal’s $253 million. The company paid out dividends worth $71.5 million during fiscal 2020 and has increased dividend for the 19th consecutive year.  Royal Gold ended fiscal 2020 with $319 million cash in hand, up from the $119 million at the end of fiscal 2019.

As of the end of the fiscal 2020, the company’s total debt was $300.4 million, up from the $214.5 million at the end of fiscal 2019. As of Jun 30, 2020, Royal Gold had $695 million available and $305 million outstanding under the revolving credit facility.

Operational Highlight

Royal Gold reported volume of 70,100 GEOs (Gold Equivalent Ounces), down 20.7% from the year-earlier quarter. In fiscal 2020, Royal Gold reported volumes of 320,000 GEOs.

Fiscal 2020 Performance

Royal Gold reported adjusted earnings per share of $2.47 in fiscal 2020, up 64% year over year driven by increase in revenues, lower interest expenses and discrete income tax benefits. The bottom line surpassed the Zacks Consensus Estimate of $2.43. Including one-time items, the company reported earnings of $3.03 compared with $1.43 in fiscal 2019.

The company’s revenues improved 18% year over year to a record $499 million, which came in line with the Zacks Consensus Estimate.  Increase in stream revenues and a higher average gold and silver prices drove revenues in the fiscal.
 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

At this time, Royal Gold has a nice Growth Score of B, a grade with the same score on the momentum front. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision looks promising. 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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