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Franco-Nevada (FNV) Up 8.2% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Franco-Nevada (FNV - Free Report) . Shares have added about 8.2% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Franco-Nevada 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.

Franco-Nevada Q3 Earnings and Revenues Beat Estimates
 
Franco-Nevada Corporation delivered net earnings of $54.6 million or 29 cents per share for third-quarter 2018, ahead of the Zacks Consensus Estimate of 26 cents per share. The company reported net earnings of $55.3 million or 30 cents in the prior-year quarter.
 
The company generated revenues of $171 million in the third quarter, declining 0.5% from the year-ago quarter. The figure beat the Zacks Consensus Estimate of $164 million. In the reported quarter, 82.1% of the revenues were sourced from precious metals (64.8% gold, 12.0% silver and 5.3% platinum group metals).
 
The company sold 120,021 Gold Equivalent Ounces in the quarter, down 3% from 123,787 Gold Equivalent Ounces in the prior-year quarter.
In the reported quarter, adjusted EBITDA was $135 million, up 0.4% from $134 million a year ago. 
Prices
 
At third-quarter end, the average gold price was at $1,218 per ounce, approximately 5% lower than the year-ago quarter. Silver prices averaged $14.99 per ounce in the third quarter, decreasing 11% year over year. Platinum fell 15% year over year to $814 per ounce while palladium prices increased 6% year over year to $953 per ounce.
 
Financial Position
 
Franco-Nevada’s cash and cash equivalents fell to $77 million as of Sep 30, 2018, down substantially from $511 million as of Dec 31, 2017. The company recorded operating cash flow of $377 million for the nine-month period ended Sep 30, 2018 compared with $362 million in the prior-year comparable period.
 
On Oct 23, 2018, Franco-Nevada contributed $214.8 million to close its previously announced transaction with Continental Resources, Inc. to acquire mineral rights in the SCOOP and STACK plays of Oklahoma. Franco-Nevada has also committed, subject to satisfaction of agreed upon development limits, to spend up to $300 million over the next three years to acquire additional mineral rights through a newly-formed company.
 
Franco-Nevada’s board of directors declared a quarterly dividend of 24 cents per share. The dividend will be paid on Dec 20, 2018 to shareholders of record on Dec 6, 2018.
 
2018 Guidance for Oil & Gas Assets Hiked
 
The company now anticipates revenues between $75 million and $85 million from its oil & gas assets for 2018, up from its previous guidance of $65 million to $75 million to reflect the continued strong performance of the oil & gas assets. The company expects the WTI oil price will average $65 per barrel for the balance of the year. 
 
Subsequent to third-quarter end, Franco-Nevada made the final installment on the $1 billion funding commitment for the Cobre Panama project. Revenues are anticipated to increase by more than 30% once the Cobre Panama project ramps-up towards full production over the next two years. In 2019, Candelaria is expected to return to normal operations. Additionally, the continued development of its U.S. oil & gas assets will drive more than 30% increase in revenue and EBITDA, going forward.
 

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month.

VGM Scores

At this time, Franco-Nevada has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.

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

Outlook

Franco-Nevada has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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