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Barrick (GOLD) Shares Up 32% YTD: What's Driving the Rally?

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Barrick Gold Corporation’s (GOLD - Free Report) shares have shot up 31.6% so far this year. The company has also topped its industry’s rise of 9.1% over the same time frame.

The gold mining giant has a market cap of roughly $43.6 billion and average volume of shares traded in the last three months is around 20,972.2K.


 

Let’s take a look into the factors that are driving this Zacks Rank #2 (Buy) stock.

What’s Working in Barrick’s Favor?

Higher gold prices have contributed to the rally in Barrick’s shares. The coronavirus pandemic has led to a surge in gold prices this year, driven by the demand for safe-haven investments. Slumping crude oil prices, a low interest rate environment and geopolitical tensions are also triggering demand for gold. Concerns over supply crunch arising from suspensions of operations by miners per government mandates are also contributing to the gain in gold prices.

Gold prices, in early March, surged past the $1,700 an ounce level for the first time in seven years on the virus crisis and a sharp decline in oil prices triggered by Saudi Arabia's price war with Russia.

Prices of the yellow metal also hit the highest level since October 2012 on Apr 14. Apprehensions regarding global economic growth amid the pandemic coupled with stimulus measures from central banks and governments to counter the same boosted gold prices. Notably, the U.S. Federal Reserve has announced that it will inject another $2.3 trillion to support the U.S. economy amid the virus crisis. Worries over coronavirus’ impact on the global economy is likely to keep supporting the bullion moving ahead.

Meanwhile, Barrick’s average realized price of gold climbed around 21% year over year in fourth-quarter 2019 and boosted its margins. Higher year over year gold prices are also expected to continue driving its earnings in the first quarter.

Barrick is also benefiting from its actions to reduce debt. The company cut its total debt by 3.2% year over year to $5.5 billion at the end of 2019. Also, it has a strong liquidity position and generates healthy cash flows, which positions it well to benefit from development, exploration and acquisition opportunities. At the end of 2019, Barrick’s cash and cash equivalents surged 111% year over year to $3.3 billion.

Barrick also remains focused on its major exploration programs. The company’s growth projects across Turquoise Ridge, Goldrush and Cortez Deep South in Nevada are currently in execution. Construction of the third shaft at Turquoise Ridge is advancing according to schedule and is expected to deliver additional value. The Deep South project is also expected to contribute to Cortez’s production this year.  

Last month, Barrick also announced that the proposed expansion of the Pueblo Viejo gold mine will boost the mine life and also contribute to the economy of Dominican Republic till 2040 and beyond. The project will require an initial investment of $1.3 billion for expansion of the process plant and the tailings facility. The investment will extend the mine’s life and unlock potential to increase exports by $22 billion. The Pueblo Viejo expansion will also enable the mine to exploit the lower grades in the ore body.

Moreover, earnings estimate revisions have the greatest impact on stock prices. Over the past two months, the Zacks Consensus Estimate for 2020 earnings for Barrick moved up 7.2%. Further, the consensus mark for 2020 earnings is currently pegged at 74 cents per share, which suggests a year-over-year growth of 45.1%.
 

 

Stocks to Consider

Other top-ranked stocks worth considering in the basic materials space are The Scotts Miracle-Gro Company (SMG - Free Report) , NovaGold Resources Inc. (NG - Free Report) and Newmont Corporation (NEM - Free Report) .

Scotts Miracle-Gro has an expected earnings growth rate of 15.9% for the current fiscal year. The company’s shares have gained roughly 35% in the past year. It currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

NovaGold has a projected earnings growth rate of 11.1% for the current year. It currently carries a Zacks Rank #2. The company’s shares have surged roughly 185% in a year.

Newmont has a projected earnings growth rate of 83.3% for the current year. The company’s shares have rallied around 70% in a year. It currently has a Zacks Rank #2.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

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