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Why Is Kinross Gold (KGC) Down 12.6% Since Last Earnings Report?

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It has been about a month since the last earnings report for Kinross Gold (KGC - Free Report) . Shares have lost about 12.6% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Kinross Gold 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 catalysts.

Kinross Q2 Earnings In Line, Revenues Miss Estimates

Kinross reported net profit of $2.4 million or break-even earnings per share in second-quarter 2018, down from $33.1 million or 3 cents recorded in the year-ago quarter.

Barring one-time items, adjusted earnings of 3 cents per share came in line with the Zacks Consensus Estimate.

Revenues totaled $775 million, which declined 10.8% from $868.6 million registered in the year-ago quarter. The downside can be attributed to a decrease in gold equivalent ounces sold, partly offset by higher realized gold price. The reported figure missed the Zacks Consensus Estimate of $801 million in the quarter under review.



Operational Performance

Attributable gold production was 602,049 ounces for the quarter, down 13.4% year over year. Production cost of sales per gold equivalent ounce increased to $767 from $660 recorded in the prior-year quarter. All-in sustaining cost per gold equivalent ounce sold increased to $1,018 from $910 a year ago.

Margin per gold equivalent ounce sold was $539 in the quarter, down from $600 a year ago.

Average realized gold prices was $1,306 per ounce in the quarter, up 9% from $1,260 a year ago.

Financial Review

Adjusted operating cash flow was $231.5 million, slightly up from $230.8 million in the prior-year quarter. Cash and cash equivalents were $918.7 million as of Jun 30, 2018, down from $1,061.3 million as of Jun 30, 2017.

Long-term debt amounted to $1,733.8 million, down from $1,734.5 million a year ago. The company has no scheduled debt maturities due until 2021.

Capital expenditures rose to $247.1 million from $200.7 million in the prior-year quarter. The upside was driven by higher spending at Round Mountain and Bald Mountain.

Development Updates

Kinross provided updates on the Round Mountain Phase W and Bald Mountain Vantage projects in Nevada. Both projects are proceeding well and under budget. Initial Phase W ore is likely to be encountered in mid-2019 while commissioning for the heap leach pad and processing facilities for the Bald Mountain Vantage is expected to commence in first-quarter 2019.

Construction for the Tasiast Phase One is now complete. Over the past month, throughput of the mine has continued to ramp up and peaked at 12,000 tons per day.

Outlook

Kinross has reaffirmed its production and cost outlook for 2018. The company expects gold production of 2.5 million (+/- 5%) gold equivalent ounces. Expected production cost of sales for the year has been kept unchanged at $730 (+/- 5%) per gold equivalent ounce. All-in sustaining cost is expected to be $975 (+/- 5%) per gold equivalent ounce.

For 2018, Kinross continues anticipating capital expenditures of roughly $1,075 million.
 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -38.46% due to these changes.

VGM Scores

Currently, Kinross Gold has a subpar Growth Score of D, a grade with the same score on the momentum front. However, the stock was allocated 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 C. 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 style scores.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Kinross Gold has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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