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Why Is Franco-Nevada (FNV) Up 1.4% Since Last Earnings Report?

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A month has gone by since the last earnings report for Franco-Nevada (FNV - Free Report) . Shares have added about 1.4% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Franco-Nevada due for a pullback? 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.

Franco-Nevada Earnings Beat Estimates in Q1, View Up

Franco-Nevada reported adjusted earnings of 84 cents per share in first-quarter 2021, up 47% from the prior-year quarter. Additionally, the bottom line surpassed the Zacks Consensus Estimate of 79 cents.

The company generated revenues of $309 million in the reported quarter, reflecting year-over-year growth of 28%. The top-line figure, however, missed the Zacks Consensus Estimate of $313 million. In the March-end quarter, 85.4% of revenues were sourced from gold and gold equivalents (61.6% gold, 15.4% silver, 6.3% platinum group metals and 2.1% from other mining assets).

The company sold 149,575 Gold Equivalent Ounces (GEOs) in the reported quarter, up from the prior-year quarter’s 134,941 GEOs. Higher contributions from the Hemlo, Cobre Panama, Antapaccay and Antamina mines were partly offset by lower contributions from Sudbury and Guadalupe-Palmarejo.

During the reported quarter, adjusted EBITDA climbed 36% to $263 million, year over year.

In first-quarter 2021, the average gold price was $1,794 per ounce, 13.3% higher than the year-ago quarter. Silver prices averaged $26.26 per ounce in the quarter, up 55.4% year on year. Platinum prices went up 28.5% year over year to $1,161 per ounce, and palladium prices increased 5.3% year on year to $2,405 per ounce.

Financial Position

The company had $538.5 million cash in hand at the end of first-quarter 2021, up from the $534 million reported as of the end of 2020. It recorded an operating cash flow of $224.3 million in the first quarter, up from the $195.2 million witnessed in the prior-year quarter.

Franco-Nevada is debt free and uses its free cash flow to expand the company’s portfolio and payout dividends. The company’s board hiked the quarterly dividend by 15.4% to 30 cents per share. This marks the 14th consecutive annual dividend increase. The dividend is payable on Jun 24 to shareholders of record on Jun 10, 2021.

Guidance

The company now expects attributable royalty and stream sales from its mining assets between 580,000 GEOs and 615,000 GEOs for the current year, up from the prior guided range of 555,000 GEOs to 585,000 GEOs. The upbeat guidance reflects acquisition of the Vale S.A’s (VALE Quick QuoteVALE - Research Report) Royalty Debentures. Franco-Nevada expects to generate additional revenues of $115-$135 million from Energy assets. The WTI oil price and Henry Hub natural gas prices are assumed to average $55 per barrel and $2.50 per mcf, respectively.

Other Updates

On Apr 16, the company acquired 57 million of Vale’s outstanding participating debentures for $538 million. Moreover, Franco-Nevada accrued 9.9% equity investment in Labrador Iron Ore Royalty Corporation. These investments are accretive to the company’s cash flow.

How Have Estimates Been Moving Since Then?

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

VGM Scores

Currently, Franco-Nevada has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% 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 trending upward for the stock, and the magnitude of these revisions has been net zero. Notably, Franco-Nevada has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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