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Franco-Nevada Up 2% Since Q2 Earnings Release: Here's Why

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Shares of Franco-Nevada Corporation (FNV - Free Report) have been up 2.3% since the company’s second-quarter 2019 earnings release on Aug 7, ahead of the industry’s growth of 0.5%.


Franco-Nevada, a Zacks Rank #1 (Strong Buy) stock, has a market cap of roughly $17.6 billion. The company has an expected long-term earnings per share growth rate of 4%.

Let’s take a detailed look into the company’s second-quarter 2019 results.

Franco-Nevada delivered stellar earnings results for the June-end quarter. The company recorded adjusted earnings of $64 million or 34 cents per share, up from the prior-year quarter’s $53.7 million or 29 cents per share. In addition, the earnings per share figure surpassed the Zacks Consensus Estimate of 31 cents.
At the end of the quarter, 83.8% of revenues were sourced from gold and gold equivalents (62.2% gold, 9.7% silver, 8.6% platinum group metals and 3.3% other mining assets) and 16.2% from energy (oil, gas and natural gas liquids).

Energy revenues benefited from the company's investment in the Royalty Acquisition Venture with Continental. The company now anticipates to generate $100-$115 million in revenues from its energy assets compared with the prior estimate of $70-$85 million, driven by the Marcellus royalty acquisition and solid performance of energy assets. With the continued development of its U.S. oil & gas assets, the company forecasts energy assets to contribute 16-17% of revenues by 2023.

Franco-Nevada has completed its $1-billion commitment for the Cobre Panama project. In July, the facility commenced production of initial gold and silver stream and will likely produce 140,000-175,000 tons of copper in the current year. Further, the project is anticipated to be a major growth driver for the second half of this year. For 2019, the company expects gold production from the project to come in at the upper end of the prior guidance of 20,000-40,000 ounces.

Franco-Nevada expects Gold Equivalent Ounces (GEOs) to be at the upper end of the previously-issued guidance of 465,000-500,000 GEOs, driven by strong results so far, and increase in expected deliveries from the project.

Furthermore, Franco-Nevada appears to be on a promising long-term trajectory backed by a sound portfolio of streaming and royalty agreements put in place years ago. With more mines coming online over the next several years, it will benefit from higher levels of precious metal sales and higher prices.

Earnings Estimate Revision

Earnings estimate revisions impact share prices significantly. Estimates for 2019 for Franco-Nevada have moved north over the past 30 days. During this period, the Zacks Consensus Estimate for earnings moved up around 10.5% for the year. The Zacks Consensus Estimate for third quarter earnings has also increased roughly 18.9% over the same timeframe.

Other Stocks to Consider

Some other top-ranked stocks in the basic materials space are Kinross Gold Corp. (KGC - Free Report) , Alamos Gold Inc. (AGI - Free Report) and Arconic Inc. (ARNC - Free Report) , each flaunting a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Kinross has an expected earnings growth rate of a whopping 140% for 2019. The company’s shares have surged 63.4% over the past year.

Alamos Gold has an outstanding projected earnings growth rate of 280% for the current year. The company’s shares have appreciated 56.5% in a year’s time.

Arconic has an estimated earnings growth rate of 42.7% for the ongoing year. The stock has rallied 17% in the past year.

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