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Why Is Barrick Gold (ABX) Up 9.7% Since the Last Earnings Report?

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It has been about a month since the last earnings report for Barrick Gold Corporation (ABX - Free Report) . Shares have added about 9.7% in that time frame, outperforming the market.

Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? 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.

Barrick’s Q2 Earnings & Revenues Beat Estimates

Barrick  reported net earnings (attributable to equity holders) of $1,084 million or 93 cents per share for second-quarter 2017, compared to $138 million or 12 cents a year-ago.

Barring one-time items, adjusted net earnings were $261 million or 22 cents per share for the quarter. Earnings per share beat the Zacks Consensus Estimate of 20 cents.

Higher adjusted net earnings were mainly due to 10% decrease in direct mining costs, driven by lower costs at Pueblo Viejo and Barrick Nevada, higher sales from low-cost operations at Barrick Nevada and lower relative sales from Turquoise Ridge and Acacia compared to the year-ago quarter. Higher gold and copper sales volumes along with higher copper prices also contributed to robust earnings which were partly offset by higher depreciation, increase in tax expense and increase in evaluation and exploration costs.

Revenues rose roughly 7.3% year over year to $2,160 million in the reported quarter. The figure also topped the Zacks Consensus Estimate of $2,155 million.

Cost of sales fell roughly 4.4% year over year to $1,277 million in the reported quarter.

Operational Highlights

Total gold production was 1.43 million ounces in the reported quarter, up 6.9% from 1.34 million ounces a year ago.

Average realized price of gold marginally fell to $1,258 per ounce in the reported quarter from the year-ago quarter figure of $1,259. AISC decreased to $710 per ounce in the reported quarter from $782 a year ago.

Copper production increased to 104 million pounds in the reported quarter from 103 million pounds in the prior-year quarter. Average realized copper price was $2.60 per pound in the quarter, up from $2.14 per pound a year ago.

Financial Position

Cash and cash equivalents were $2,926 million at the end of first quarter, up roughly 19.9% year over year.

Barrick reduced total debt by $309 million in the second quarter. On Jun 30, the company completed the sale of 50% interest in Veladero mine in Argentina to Shandong Gold for roughly $960 million. A significant portion of the proceeds from this deal has been allocated to reduce debt.  

Guidance

For 2017, Barrick anticipates gold production in the range of 5.3–5.6 million ounces, at AISC of $720–$770 per ounce and cost of sales of $780–$820 per ounce. The company expects production to be weighted towards the fourth quarter. However, based on the company’s sales mix and capital expenditure expectations, Barrick anticipates higher costs in the third quarter.  

The company expects full year copper production in the band of 400–450 million pounds, at AISC of $2.10–2.40 per pound and cost of sales of $1.50–$1.70 per pound.

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed a downward trend in fresh estimates. There have been four revisions lower for the current quarter. In the past month, the consensus estimate has shifted downward by 15.7% due to these changes.

VGM Scores

At this time, Barrick Gold's stock has a subpar Growth Score of D, though it is lagging a bit on the momentum front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

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

The company's stock is suitable solely for value based on our styles scores.

Outlook

Estimates have been broadly trending downward for the stock. The magnitude of this revision also 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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