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What's in Store for Pan American Silver (PAAS) Q4 Earnings?

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Pan American Silver Corp. PAAS is slated to report fourth-quarter 2019 results on Feb 19, after the closing bell.

Which Way are Q4 Estimates Headed?

The Zacks Consensus Estimate for Pan American Silver’s fourth-quarter earnings is currently pegged at 25 cents. The company had incurred a loss of 1 cent per share in the year-ago quarter. The Zacks Consensus Estimate for revenues is currently pegged at $407 million, suggesting a 135% surge from the prior-year quarter.

Let’s see how things have shaped up prior to this announcement.

Pan American Silver Corp. Price and EPS Surprise

Earnings Whisper

Our proven model predicts an earnings beat for Pan American Silver this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Pan American Silver has an Earnings ESP of +5.61%. This is because the Most Accurate Estimate and the Zacks Consensus Estimate are currently pegged at 27 cents and 25 cents, respectively.

Zacks Rank: The company currently carries a Zacks Rank #3.

Factors to Consider

Pan American Silver is poised well to gain from asset optimization, debt reduction, brownfield exploration and strong, low cost production. These factors are likely to have aided its fourth-quarter performance.

In 2019, the company acquired Tahoe Resources and successfully integrated the new assets into its portfolio, capturing $25-$30 million in annual synergies. The company is focused on capturing synergies and maintaining low-cost operations across the company through the Tahoe acquisition. Hence, the deal is expected to have bolstered the company’s operational performance during the October-December period.

In the fourth quarter, the company produced 6.6 million silver ounces compared with the 6.1 million ounces in the prior-year quarter. Gold production was 173 thousand ounces compared with the 37.2 thousand ounces witnessed in fourth-quarter 2018. Upbeat gold and silver production as well as higher prices are likely to have contributed to the company’s revenues in the December-end quarter. During the period, Pan American Silver is expected to have realized $17.8 million revenues associated with a build in metal inventory in the third quarter.  

Considering better-than-anticipated cost performance in the prior quarter, consolidated cash costs and AISC costs are expected to have lowered in the fourth quarter as well.

Pan American Silver’s financial position continues to strengthen, enabling it to advance growth projects and brownfield exploration, especially at La Colorada. During third-quarter 2019, Pan American completed 14,300 meters of drilling on the La Colorada Skarn exploration. The exploration drilling enabled the company to expand the mineralized footprint and identify a high-grade core zone with an initial resource estimate of 72.5 million tonnes of polymetallic mineralization.

The La Colorada mine achieved an average mining and processing rate of more than 2,100 tons per day, resulting in higher annual silver, zinc and lead production for the to-be-reported quarter. Pan American Silver continues to achieve greater-than-expected efficiencies from the mine expansion completed in 2017. Hence, mine-expansion efforts are likely to have aided the company’s performance in the soon-to-be reported quarter.

Other Stocks That Warrant a Look

Here are a few other Basic Materials stocks which you may consider as our model shows that these have the right combination of elements to post an earnings beat in their upcoming releases:

Wheaton Precious Metals Corp. (WPM - Free Report) has an Earnings ESP of +7.04% and carries a Zacks Rank of 3, currently. You can see the complete list of today's Zacks #1 Rank stocks here.

Cleveland-Cliffs Inc. CLF currently carries a Zacks Rank #3 and has an Earnings ESP of +29.17%.

AK Steel Holding Corporation AKS, another Zacks Ranked #3 stock, has an Earnings ESP of +11.11%.

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