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Wheaton (WPM) Hits 52-Week High: What's Driving the Rally?

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Shares of Wheaton Precious Metals Corp. (WPM - Free Report) scaled a fresh 52-week high of $47.05 during the trading session on May 19, before retracting a bit to close at $46.70. The company’s continued focus on mine expansions, strong financial position and higher gold prices contributed to this rally.

Wheaton has a market cap of $20.3 billion. The company has an expected long-term earnings per share growth rate of 5%.

In the past six months, shares of Wheaton have gained 69.9%, outperforming the industry’s growth of 0.5%.

Driving Factors

Gold prices have been up 14.8% so far this year fueled by the slowdown in manufacturing activity, rate cuts, geopolitical tensions, and apprehensions regarding the coronavirus outbreak. The combination of lower mined gold supply and higher demand, and geopolitical tensions are likely to drive prices north in the days to come.

Wheaton remains focused on mine exploration and expansion activities. The company expects higher production of silver grade at its Penasquito mine in the current year. At Constancia, Hudbay has secured the surface rights for the Pampacancha deposit and expects to begin mining the satellite deposit late this year. At the Stillwater mine, palladium and gold productions are expected to increase with the continued ramp-up of the mill projects. These projects are anticipated to be growth drivers in the years to come.

Moreover, Wheaton's solid cash position, operating cash flows, combined with available credit capacity of more than $1.1 billion, under the revolving facility of $2 billion, helps the company invest in growth opportunities as well as sustain its dividend policy. These also provide flexibilities to acquire additional accretive precious metals. Moreover, the company’s efforts to reduce its debt levels are encouraging.

The company’s low-risk, high-margin nature of business is placed well to navigate through the current market conditions and commodity-price uncertainty. The company’s 88% of production comes from lower cost mines with higher margins, and hence, at the current lower base metal prices, Wheaton’s partner operations are well poised to run with low commodity-price cycles.

Wheaton has precious metal (gold, silver and palladium) purchase agreement with several other mining companies. Its partner operations are currently running with the exception of Voisey's Bay, Constancia, Yauliyacu, San Dimas, Los Filos, Antamina and Peñasquito mines due to the temporary ramp down of operations at some of its partner mines amid the coronavirus pandemic. The company is implementing measures to minimize any possible impact of the coronavirus outbreak on its business.

Positive Growth Projections

The Zacks Consensus Estimate for Wheaton’s 2020 earnings is currently pegged at 91 cents per share, indicating a year-over-year surge of 62.5%. The same for 2021 earnings is pinned it $1.04 per share, suggesting year-over-year growth of 15.2%.

Zacks Rank & Other Stocks to Consider

Wheaton currently carries a Zacks Rank #2 (Buy).

A few other top-ranked stocks in the basic materials space are Newmont Corporation (NEM - Free Report) , Barrick Gold Corporation (GOLD - Free Report) and Franco-Nevada Corporation (FNV - Free Report) , each currently carrying a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Newmont has an expected earnings growth rate of 90.2% for 2020. The company’s shares have surged 103.6% in the past year.

Barrick Gold has an estimated earnings growth rate of 60.8% for the ongoing year. Its shares have soared 112.7% over the past year.

Franco-Nevada has a projected earnings growth rate of 19.2% for the current year. The company’s shares have appreciated 92.5% in a year’s time.

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