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Gold Mining Stocks & ETFs Look Bullish Before Q1 Earnings

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Gold miners are likely coronavirus beneficiaries as the space added about 45% past month (as of Apr 28, 2020), breezing past the S&P 500 ETF’s (IVV - Free Report) 12.74% gains. In comparison, gold bullion ETF (GLD - Free Report) advanced about 6%.

The Fed’s super-dovish stance since March and the resultant moderate strength in the greenback, a mammoth government stimulus, uptick in investor sentiment, lower oil prices, cheaper valuation and relatively low debt of the mining companies facilitated this spectacular performance (read: 5 Reasons Why Gold Mining ETFs & Stocks Have More Room to Run).

Gold mining companies are better positioned than they’ve been in 10-20 years with low operating costs, healthy balance sheets, and attractive valuations, as per investment management firm VanEck.

The industry has a debt/equity ratio of 0.02x versus 0.72x of IVV. Current ratio of 2.17x versus IVV’s 1.23x also points toward the sound liquidity position of the gold mining industry (read: Sector ETFs to Win or Lose on Oil Collapse).

Projected first-quarter EPS growth rate of the gold mining industry is 56.8% versus a decline of 15.4% in the S&P 500. The long-term EPS growth rate of the industry is 10.5% versus 8.4% of the S&P 500. Gold mining stocks come from a favorable Zacks industry (placed at the top 3% of total 250+ industries in the Zacks universe).

Against this scenario, let’s take a look at what’s in store for gold mining stocks this reporting season and how the related ETFs can be impacted. Notably, all the below-mentioned companies have a Zacks Rank #2 (Buy).

Inside the Expected Earnings Performance

Per our proven model, 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.

One of the world’s largest gold producers Newmont Corporation (NEM - Free Report) will report on May 5. This stock has an Earnings ESP of 0.00%. Barrick Gold Corporation (GOLD - Free Report) too has an ESP of 0.00%. NEM will report on May 5 and Barrick will report the day after.

Another miner Franco-Nevada Corporation (FNV - Free Report) , which generates around 84% of revenues from the Americas and 16% from the rest of the world, is likely to report on May 6, after market close. Franco-Nevada has an ESP of 0.00%. Royal Gold Inc. (RGLD - Free Report) will report onMay 6 and has an ESP of 0.00%.

Wheaton Precious Metals Corp. (WPM - Free Report) is one of the largest precious metal streaming companies in the world. It will report on May 6 and has an ESP of +2.58%. A positive ESP indicates analysts’ bullishness before the earnings release. However, Kinross Gold Corporation (KGC - Free Report) , which will report on May 5, has a negative ESP of 3.48%.

ETF Impact

All the stocks mentioned above have a considerable focus on VanEck Vectors Gold Miners ETF (GDX - Free Report) . Not much of negative analyst sentiment about the space a week before earnings releases makes us hopeful about further gains in GDX.

Investors can also tap other gold mining ETFs like iShares MSCI Global Gold Miners ETF (RING - Free Report) , Sprott Gold Miners ETF (SGDM - Free Report) and US Global GO GOLD and Precious Metal Miners ETF (GOAU - Free Report) to ride the ongoing winning trend.

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