We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Agnico Eagle Trades at a Premium Valuation: How to Play the Stock?
Read MoreHide Full Article
Key Takeaways
AEM trades at a 20.57X forward P/E, well above the industry average and gold mining peers
AEM posted 93.7% stock gains in a year, fueled by gold's rally, strong production and earnings beats.
Agnico Eagle 2025 EPS estimates are going up, driven by high gold prices and solid output.
Agnico Eagle Mines Limited (AEM - Free Report) is currently trading at a forward price/earnings of 20.57X, a roughly 42.7% premium to the Zacks Mining – Gold industry average of 14.41X. AEM is also trading at a premium to its gold mining peers, Barrick Mining Corporation (B - Free Report) , Newmont Corporation (NEM - Free Report) and Kinross Gold Corporation (KGC - Free Report) . Agnico Eagle has a Value Score of C. Both Barrick Mining and Kinross Gold have a Value Score of A, while Newmont has a Value Score of B.
Image Source: Zacks Investment Research
AEM's shares have performed impressively on the bourses thanks to a spike in gold prices and its forecast-topping earnings performance on higher realized prices and strong production. Its shares have rallied 93.7% over the past year, topping the industry’s 61.6% rise and the S&P 500’s increase of 9.2%. It has outperformed Barrick Mining and Newmont’s gains of 33.8% and 41.5%, respectively, while underperforming Kinross Gold’s rally of 113.7% over the same period.
AEM’s One-year Price Performance
Image Source: Zacks Investment Research
Agnico Eagle has been trading above the 200-day simple moving average (SMA) since March 4, 2024. The stock is also currently trading above the 50-day SMA, which continues to read higher than the 200-day SMA, indicating a bullish trend.
Agnico Eagle’s Shares Trade Above 50-Day SMA
Image Source: Zacks Investment Research
AEM’s lofty valuation may not present a compelling value proposition at these levels. Let’s take a look at its fundamentals to better analyze how to play the stock.
Advancement of Key Projects to Drive AEM’s Growth
Agnico Eagle is focused on executing projects that are expected to provide additional growth in production and cash flows. It is advancing its key value drivers and pipeline projects, including the Odyssey project in the Canadian Malartic Complex, Detour Lake, Hope Bay, Upper Beaver and San Nicolas.
The Hope Bay Project, with proven and probable mineral reserves of 3.4 million ounces, is expected to play a significant role in generating cash flow in the coming years. The processing plant expansion at Meliadine was completed and commissioned in the second half of 2024, with mill capacity expected to increase to roughly 6,250 tons per day in 2025.
The merger with Kirkland Lake Gold established Agnico Eagle as the industry's highest-quality senior gold producer. The integrated entity now has an extensive pipeline of development and exploration projects to drive sustainable growth. It also has the financial flexibility to fund a strong pipeline of growth projects.
AEM’s Capital Allocation Backed by Solid Financial Health
AEM has a robust liquidity position and generates substantial cash flows, which allow it to maintain a strong exploration budget, finance a strong pipeline of growth projects, pay down debt and drive shareholder value. Its operating cash flow jumped roughly 33% year over year to record $1,044 million in the first quarter.
AEM generated solid first-quarter free cash flows of $594 million, up around 50% year over year, backed by the strength in gold prices and strong operational results. It remains focused on paying down debt using excess cash, with net debt reducing by $212 million sequentially to just $5 million at the end of the first quarter. Its long-term debt-to-capitalization is just around 5%. AEM also returned around $920 million to its shareholders through dividends and repurchases last year and $251 million in the first quarter.
Higher gold prices should boost AEM’s profitability and drive cash flow generation. Gold prices have rallied roughly 31% this year, largely attributable to aggressive trade policies, including sweeping new import tariffs announced by President Donald Trump that have intensified global trade tensions and heightened investor anxiety. Also, central banks worldwide have been accumulating gold reserves, led by risks arising from Trump’s policies. Prices of the yellow metal catapulted to a record high of $3,500 per ounce on April 22. While gold prices have fallen from their April 2025 highs, they remain favorable. The yellow metal is gaining from safe-haven demand triggered by trade and geopolitical uncertainties, and is currently hovering above the $3,400 per ounce level. Increased purchases by central banks, hopes of interest rate cuts, and geopolitical tensions worsened by the Israel-Iran conflict are factors expected to help the yellow metal sustain the rally.
AEM offers a dividend yield of 1.3% at the current stock price. It has a five-year annualized dividend growth rate of 10.3%. AEM has a payout ratio of 32% (a ratio below 60% is a good indicator that the dividend will be sustainable). The company's dividend is perceived as safe and reliable, backed by strong cash flows and sound financial health.
Higher Costs Weigh on Agnico Eagle Stock
Agnico Eagle is exposed to higher production costs. In the first quarter of 2025, its total cash costs per ounce of gold were up modestly from the previous year to $903. While all-in-sustaining costs (AISC) declined in the quarter due to the deferral of certain sustaining capital expenditures, AEM projects the same to increase for the remainder of 2025. AEM forecasts total cash costs per ounce in the range of $915 to $965 and AISC per ounce between $1,250 and $1,300 for 2025, suggesting a year-over-year increase at the midpoint of the respective ranges. While AEM is taking actions to control costs, the inflationary pressure is likely to continue over the near term, weighing on its profit margins and overall financial performance.
AEM’s Earnings Estimates Going Up
The Zacks Consensus Estimate for AEM’s 2025 earnings has been going up over the past 60 days. The consensus estimate for second-quarter 2025 earnings has also been revised upward over the same time frame.
The Zacks Consensus Estimate for 2025 earnings is currently pegged at $6.03, suggesting year-over-year growth of 42.6%. Earnings are expected to register roughly 35.5% growth in the second quarter.
Image Source: Zacks Investment Research
(Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)
Final Thoughts: Hold Onto AEM Stock
With a strong pipeline of growth projects, solid financial health and bullish technicals, AEM presents a compelling investment case for those seeking exposure to the gold mining space. Surging gold prices should also boost AEM’s profitability and drive cash flow generation. However, its high production costs warrant caution. The company’s stretched valuation also might not offer an attractive entry point at this time. Holding onto this Zacks Rank #3 (Hold) stock will be prudent for investors who already own it.
Image: Bigstock
Agnico Eagle Trades at a Premium Valuation: How to Play the Stock?
Key Takeaways
Agnico Eagle Mines Limited (AEM - Free Report) is currently trading at a forward price/earnings of 20.57X, a roughly 42.7% premium to the Zacks Mining – Gold industry average of 14.41X. AEM is also trading at a premium to its gold mining peers, Barrick Mining Corporation (B - Free Report) , Newmont Corporation (NEM - Free Report) and Kinross Gold Corporation (KGC - Free Report) . Agnico Eagle has a Value Score of C. Both Barrick Mining and Kinross Gold have a Value Score of A, while Newmont has a Value Score of B.
AEM's shares have performed impressively on the bourses thanks to a spike in gold prices and its forecast-topping earnings performance on higher realized prices and strong production. Its shares have rallied 93.7% over the past year, topping the industry’s 61.6% rise and the S&P 500’s increase of 9.2%. It has outperformed Barrick Mining and Newmont’s gains of 33.8% and 41.5%, respectively, while underperforming Kinross Gold’s rally of 113.7% over the same period.
AEM’s One-year Price Performance
Agnico Eagle has been trading above the 200-day simple moving average (SMA) since March 4, 2024. The stock is also currently trading above the 50-day SMA, which continues to read higher than the 200-day SMA, indicating a bullish trend.
Agnico Eagle’s Shares Trade Above 50-Day SMA
AEM’s lofty valuation may not present a compelling value proposition at these levels. Let’s take a look at its fundamentals to better analyze how to play the stock.
Advancement of Key Projects to Drive AEM’s Growth
Agnico Eagle is focused on executing projects that are expected to provide additional growth in production and cash flows. It is advancing its key value drivers and pipeline projects, including the Odyssey project in the Canadian Malartic Complex, Detour Lake, Hope Bay, Upper Beaver and San Nicolas.
The Hope Bay Project, with proven and probable mineral reserves of 3.4 million ounces, is expected to play a significant role in generating cash flow in the coming years. The processing plant expansion at Meliadine was completed and commissioned in the second half of 2024, with mill capacity expected to increase to roughly 6,250 tons per day in 2025.
The merger with Kirkland Lake Gold established Agnico Eagle as the industry's highest-quality senior gold producer. The integrated entity now has an extensive pipeline of development and exploration projects to drive sustainable growth. It also has the financial flexibility to fund a strong pipeline of growth projects.
AEM’s Capital Allocation Backed by Solid Financial Health
AEM has a robust liquidity position and generates substantial cash flows, which allow it to maintain a strong exploration budget, finance a strong pipeline of growth projects, pay down debt and drive shareholder value. Its operating cash flow jumped roughly 33% year over year to record $1,044 million in the first quarter.
AEM generated solid first-quarter free cash flows of $594 million, up around 50% year over year, backed by the strength in gold prices and strong operational results. It remains focused on paying down debt using excess cash, with net debt reducing by $212 million sequentially to just $5 million at the end of the first quarter. Its long-term debt-to-capitalization is just around 5%. AEM also returned around $920 million to its shareholders through dividends and repurchases last year and $251 million in the first quarter.
Higher gold prices should boost AEM’s profitability and drive cash flow generation. Gold prices have rallied roughly 31% this year, largely attributable to aggressive trade policies, including sweeping new import tariffs announced by President Donald Trump that have intensified global trade tensions and heightened investor anxiety. Also, central banks worldwide have been accumulating gold reserves, led by risks arising from Trump’s policies. Prices of the yellow metal catapulted to a record high of $3,500 per ounce on April 22. While gold prices have fallen from their April 2025 highs, they remain favorable. The yellow metal is gaining from safe-haven demand triggered by trade and geopolitical uncertainties, and is currently hovering above the $3,400 per ounce level. Increased purchases by central banks, hopes of interest rate cuts, and geopolitical tensions worsened by the Israel-Iran conflict are factors expected to help the yellow metal sustain the rally.
AEM offers a dividend yield of 1.3% at the current stock price. It has a five-year annualized dividend growth rate of 10.3%. AEM has a payout ratio of 32% (a ratio below 60% is a good indicator that the dividend will be sustainable). The company's dividend is perceived as safe and reliable, backed by strong cash flows and sound financial health.
Higher Costs Weigh on Agnico Eagle Stock
Agnico Eagle is exposed to higher production costs. In the first quarter of 2025, its total cash costs per ounce of gold were up modestly from the previous year to $903. While all-in-sustaining costs (AISC) declined in the quarter due to the deferral of certain sustaining capital expenditures, AEM projects the same to increase for the remainder of 2025. AEM forecasts total cash costs per ounce in the range of $915 to $965 and AISC per ounce between $1,250 and $1,300 for 2025, suggesting a year-over-year increase at the midpoint of the respective ranges. While AEM is taking actions to control costs, the inflationary pressure is likely to continue over the near term, weighing on its profit margins and overall financial performance.
AEM’s Earnings Estimates Going Up
The Zacks Consensus Estimate for AEM’s 2025 earnings has been going up over the past 60 days. The consensus estimate for second-quarter 2025 earnings has also been revised upward over the same time frame.
The Zacks Consensus Estimate for 2025 earnings is currently pegged at $6.03, suggesting year-over-year growth of 42.6%. Earnings are expected to register roughly 35.5% growth in the second quarter.
(Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)
Final Thoughts: Hold Onto AEM Stock
With a strong pipeline of growth projects, solid financial health and bullish technicals, AEM presents a compelling investment case for those seeking exposure to the gold mining space. Surging gold prices should also boost AEM’s profitability and drive cash flow generation. However, its high production costs warrant caution. The company’s stretched valuation also might not offer an attractive entry point at this time. Holding onto this Zacks Rank #3 (Hold) stock will be prudent for investors who already own it.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.