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Why Is Kinross Gold (KGC) Down 7.2% Since the Last Earnings Report?

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More than a month has gone by since the last earnings report for Kinross Gold Corporation (KGC - Free Report) . Shares have lost about 7.2% 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 the most recent earnings report in order to get a better handle on the important catalysts.

Kinross Tops Earnings and Revenues Estimates in Q3

Kinross reported net profit of $60.1 million or 5 cents per share in third-quarter 2017, compared with $2.5 million or break-even earnings recorded in the year-ago quarter.

Adjusted earnings (excluding one-time items) was $84.1 million or 7 cents per share, compared with $128.7 million or 10 cents recorded a year-ago. Earnings per share beat the Zacks Consensus Estimate of 2 cents per share.

Revenues of $828 million in the quarter fell around 9% from $910.2 million recorded in the year-ago quarter owing to lower average realized gold price and lower gold equivalent ounces sold. However, revenues topped the Zacks Consensus Estimate of $796.8 million.

According to Kinross, third-quarter results benefited from the outperformance at two Nevada mines and the Tasiast mine.

Operational Performance

Attributable gold production was 653,993 ounces for the quarter, down 4.4% year over year. Production cost of sales per gold equivalent ounce declined to $662 from $719 recorded in the prior-year quarter, primarily due to lower cost of sales per ounce at Round Mountain, Fort Knox and Bald Mountain. All-in sustaining cost per gold equivalent ounce sold fell to $937 from $1,001 a year ago.

Margin per gold equivalent ounce sold was $621 in the quarter, up from $617 a year ago.

Average realized gold prices fell to $1,283 per ounce in the quarter, down 4% year over year from $1,336.

Financial Review

Adjusted operating cash flow was $320.8 million, almost unchanged from $320.3 million in the prior-year quarter. Cash and cash equivalents were $992.1 million as of Sep 30, 2017, up from $765.4 million as of Sep 30, 2016.

Long-term debt was essentially flat year over year at $1,732 million and there are no scheduled debt repayments due for the company until 2021.

Capital expenditures rose to $204.7 million in the quarter from $153.8 million in the prior-year quarter owing to Tasiast Phase One expansion project costs and higher spending at Fort Knox, partially offset by lesser spending at Kupol.

Development Updates

Kinross, in September, announced that it is proceeding with the Round Mountain Phase W and Tasiast Phase Two expansion projects. While Phase W is anticipated to extend mine life at Round Mountain by five years, Phase Two is likely to transform Tasiast into a large, world-class mine with low cost.

Kinross continues to progress with the Phase One expansion of the Tasiast mine and remains on track with its full commercial production, which is expected to begin in second-quarter 2018. The construction of the plant is 77% complete, crusher installation has begun and conveyor installation is under progress for both SAG feed and stockpile.

Kinross also continues to progress with detailed engineering work at the Vantage Complex in the South area at Bald Mountain. Overall engineering is 70% complete, initial construction is on schedule to start in first-quarter 2018 and permit process is in progress.  

The company has also completed construction of surface infrastructure at the Moroshka project with twin declines development on schedule.  

Outlook

For 2017, Kinross is tracking towards the top end of its earlier announced gold production guidance range of 2.5-2.7 million gold equivalent ounces. The overall production cost of sales and all-in sustaining cost are also tracking towards the bottom end of the earlier announced guidance range of $660-$720 per gold equivalent ounce and $925-$1,025 per gold equivalent ounce, respectively.

Kinross expects to meet its capital expenditure target roughly $900 million (+/- 5%).

How Have Estimates Been Moving Since Then?

Analysts were quiet during the past month as none of them issued any earnings estimate revisions.

VGM Scores

At this time, Kinross Gold's stock has a subpar Growth Score of D, however its Momentum is doing a lot better with an A. Following the exact same course, the stock was allocated also a grade of A on the value side, putting it in the top quintile for this investment strategy.

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

Zacks' style scores indicate that the company's stock is suitable for value and momentum investors.

Outlook

The stock has a Zacks Rank #3 (Hold). We are looking for an inline return from the stock in the next few months.


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