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Kinross (KGC) Down 12.5% Since Earnings Report: Can It Rebound?

KGC

Trades from $3

It has been about a month since the last earnings report for Kinross Gold Corporation (KGC - Free Report) . Shares have lost about 12.5% in that time frame, underperforming the market.

Will the recent negative trend continue leading up to the stock’s next earnings release, or is it due for a breakout? 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.

Kinross Posts Loss in Q4, Revenues Surpass Estimates

Kinross reported net loss of $116.5 million or $0.09 per share for fourth-quarter 2016, compared with a net loss of $841.9 million or $0.73 per share in the year-ago quarter.

Adjusted loss (excluding one-time items) was $50.9 million or $0.04 per share compared with adjusted loss of $68.8 million or $0.06 per share in the year-ago quarter. Analysts polled by Zacks were expecting earnings per share of $0.03 on average for the reported quarter.

Revenues of $902.8 million in the quarter rose around 28.6% from $706.2 million in the year-ago quarter due to an improvement in average realized gold prices and higher gold sales. Revenues also surpassed the Zacks Consensus Estimate of $866 million.

Full-Year 2016

For full-year 2016, Kinross reported net loss of $104 million or $0.08 per share, significantly narrower than the loss of $984.5 million or $0.86 per share reported in 2015. The loss narrowed due to lower impairment charges.

Adjusted earnings for the year came in at $93 million or $0.08 a share against adjusted loss of $91 million or $0.08 per share incurred in 2015. Revenues recorded for the year were $3,472 million, higher than the $3,052.2 million in 2015. Revenues were driven by higher gold sales as well as average realized price.

Operational Performance

Attributable gold production was 746,291 ounces for the quarter, up around 19.7% year over year. The increase was driven by the buyout of Bald Mountain and 50% of Round Mountain.

Production cost per gold equivalent ounce rose to $712 from $688 from the prior-year quarter, primarily due to higher per ounce cost at Round Mountain and Paracatu, as well as at Bald Mountain. Margin per gold equivalent ounce sold was $505 in the fourth quarter, up 20.2% year over year.

Average realized gold prices rose to $1,217 per ounce in the quarter from $1,108 per ounce a year ago.

Financial Review

Adjusted operating cash flow was $211.6 million, up 3.8% from $203.8 million in the prior-year quarter. Cash and cash equivalents were $827 million as of Dec 31, 2016, down from $1,043.9 million as of Dec 31, 2015.

Long-term debt increased almost 0.1% year over year to $1,733.2 million. Capital expenditures rose to $226.5 million in the quarter from $160.7 million in the prior-year quarter owing to higher spending at Bald Mountain and Tasiast.

2017 Outlook

For 2017, Kinross expects to produce 2.5–2.7 million gold equivalent ounces. Production in the second half of 2017 is expected to be higher than that in the first half, primarily due to the impact of the heap leaches at Fort Knox and Round Mountain. The overall production cost of sales is expected in the range of $660–$720 per gold equivalent ounce, while all-in sustaining cost (AISC) is estimated to be $925–$1,025 per gold equivalent ounce.

Kinross projects its capital expenditure to be $900 million.

Other operating costs are estimated to be over $60 million, including $30 million of care and maintenance costs in Chile. Depreciation, depletion and amortization is anticipated to be about $350 per gold equivalent ounce.

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed an upward trend in fresh estimates. There has been one upward revision for the current quarter. In the past month, the consensus estimate has shifted downward by 20% due to these changes.

VGM Scores

At this time, Kinross's stock has a great Growth Score of 'A', though it is lagging a lot on the momentum front with a 'D'. However, the stock was allocated a grade of 'A' on the value side, putting it in the top 20% for this investment strategy.

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

Zacks' style scores indicate that the stock is suitable for value and growth investors.

Outlook

While estimates have been trending upward for the stock, the magnitude of this revision indicates a downward shift. Interestingly, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.




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