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Will Higher Gold Production Support Yamana's Q4 Earnings?

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Yamana Gold Inc. (AUY - Free Report) is scheduled to release fourth-quarter 2019 results on Feb 13, after the closing bell.

The company delivered a positive earnings surprise of 150% in the third quarter. It has a trailing four-quarter positive earnings surprise of 100%. Strong results from major mines, especially Jacobina, El Penon, Cerro Moro and Canadian Malartic are likely to get reflected in the company’s fourth-quarter performance. Also, higher gold prices on a year-over-year basis are likely to have supported fourth-quarter performance.

The stock surged 50.2% in a year’s time compared with the industry’s 37.2% rally.

Let’s see how things are shaping up for the upcoming announcement.

What the Zacks Model Says

Our proven model predicts an earnings beat for Yamana this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earning beat. That is the case here, as you will see below:

Earnings ESP: Yamana has an Earnings ESP of +9.09%. The Zacks Consensus Estimate is currently pegged at 4 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter Filter.

Zacks Rank: Yamana currently carries a Zacks Rank #3.

What to Expect in Q4 and 2019

In January, Yamana announced preliminary production results for the fourth quarter and 2019.

In fourth-quarter 2019, the company produced 256,288 gold equivalent ounces (GEO) that includes 221,595 ounces of gold and 2.97 million ounces of silver. In 2019, the company produced 1.02 million GEO, which includes 900,339 ounces of gold. The updated preliminary data surpassed the previous guidance of 1.01 million GEO. The projected figure includes 899,000 ounces of gold. Total silver production of 10.6 million ounces for 2019 also exceeded the earlier projection of 10 million ounces.

Jacobina produced 41,774 ounces of gold during the fourth quarter with an all-time high annual production of 159,499 ounces. The figure also exceeded the revised guidance issued in June 2019.

El Penon also produced its highest quarterly and yearly production since 2016. Fourth-quarter gold production amounted to 48,131 ounces and the same for 2019 totaled 159,515 ounces. Also, the figures surpassed the company’s prior guidance. 

During the fourth quarter, Cerro Moro produced 26,568 ounces of gold and 1,584,904 ounces of silver. In 2019, gold and silver production amounted to 120,802 ounces and 6,322,864 ounces, respectively.

Canadian Malartic (50% basis) produced 85,042 ounces of gold during the fourth quarter and 334,596 ounces of gold for 2019.

Yamana’s overall production in December 2019 was 87,441 GEO, up more than 5% from the budget for the month.

The company expects costs to be in line with earlier guidance and adjustments, including around $30 per GEO stemming from the removal of production from Chapada in second-half 2019. Higher exploration spending and increased GEO ratio are likely to exert pressure on the company’s operational costs.

Other Factors at Play in Q4

Additionally, the company’s fourth-quarter performance is also expected to reflect benefits from higher gold prices. Uncertainties regarding the U.S.-China trade war, rate cuts by the U.S. Federal Reserve, global downturn concerns and tensions in the Middle East are some factors that have supported gold prices in 2019. In fact, the average realized gold price per ounce for Yamana rose 21.4% year over year in the third quarter. The trend is likely to have continued into the fourth quarter and supported margins.

Yamana Gold Inc. Price and EPS Surprise


Yamana Gold Inc. Price and EPS Surprise

Yamana Gold Inc. price-eps-surprise | Yamana Gold Inc. Quote


Few Other Stocks Likely to Beat Estimates

Here are some other companies in the basic materials space you may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Bunge Limited BG, slated to release fourth-quarter 2019 earnings on Feb 12, has an Earnings ESP of +18.18% and sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Cleveland-Cliffs Inc. CLF, scheduled to release fourth-quarter 2019 earnings on Feb 20, has an Earnings ESP of +29.17% and carries a Zacks Rank #3.

AK Steel Holding Corporation AKS, scheduled to release fourth-quarter 2019 earnings on Feb 20, has an Earnings ESP of +11.11% and carries a Zacks Rank #3.

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