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Why Is Franco-Nevada (FNV) Down 8.4% Since Last Earnings Report?
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It has been about a month since the last earnings report for Franco-Nevada (FNV - Free Report) . Shares have lost about 8.4% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Franco-Nevada due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Franco-Nevada Q1 Earnings & Sales Top Estimates, Up Y/Y
Franco-Nevada Corporation reported adjusted earnings of 58 cents per share in first-quarter 2020, up 65.7% from the prior-year quarter. Additionally, the bottom line surpassed the Zacks Consensus Estimate of 55 cents.
The company generated revenues of $241 million in the reported quarter, reflecting a year-over-year improvement of 34%. Further, the top line beat the Zacks Consensus Estimate of $234 million. In the reported quarter, 89% of revenues were sourced from gold and gold equivalents (69.4% gold, 9.2% silver, 9.4% platinum group metals and 1% from other mining assets) and 11% from energy (oil, gas and natural gas liquids).
The company sold 134,941 Gold Equivalent Ounces (GEOs) in the quarter, up from 122,049 GEOs in the prior-year quarter. The year-over-year improvement of 10.6% was driven by higher contributions from Cobre Panama, Guadalupe-Palmarejo and Hemlo, offset by lower contributions from Candelaria, Antapaccay and Sabodala mines.
During the reported quarter, adjusted EBITDA climbed 36.8% to $193 million from the $141 million witnessed in the comparable period last year.
Prices
In first-quarter 2020, the average gold price was $1,583 per ounce, 21.4% higher than the year-ago quarter. Silver prices averaged $16.90 per ounce in the quarter, up 8.5% year over year. Platinum prices went up 9.7% year over year to $903 per ounce, while palladium prices jumped 59.2% year over year to $2,284 per ounce.
Financial Position
The company had $209.8 million cash in hand as of Mar 31, 2020, up from $132.1 million reported as of Dec 31, 2019. It recorded operating cash flow of $195.2 million in the reported quarter, up from the prior-year quarter’s $143.6 million.
Franco-Nevada is debt free and uses its free cash flow to expand its portfolio and pay dividends. The company’s board has announced a quarterly dividend of 26 cents per share, marking a 4% increase from the prior dividend of 25 cents per share. This marks the 13th consecutive annual dividend increase for the company’s stakeholders.
Suspension of Guidance
Franco-Nevada has withdrawn the GEO sales guidance for the current year as its mining operators have been facing the unfavorable impact of the coronavirus outbreak, which led to temporary suspension of operations and production curtailment. It has also revoked the current-year energy revenue guidance, given the sluggish oil and gas prices. Operations at Cobre Panama and Antamina have been temporarily suspended, while Antapaccay and Candelaria continue to operate at normal levels.
Franco-Nevada’s mining revenues are likely to be affected by the production curtailments across its mining portfolio. Energy is expected to be less than 10% of the company’s current-year revenues as energy assets have been impacted by a sharp drop in commodity prices and drilling activity. Weakness across the energy sector is expected to be more than offset by strength in gold equivalent assets.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -6.49% due to these changes.
VGM Scores
Currently, Franco-Nevada has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Franco-Nevada has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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Why Is Franco-Nevada (FNV) Down 8.4% Since Last Earnings Report?
It has been about a month since the last earnings report for Franco-Nevada (FNV - Free Report) . Shares have lost about 8.4% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Franco-Nevada due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Franco-Nevada Q1 Earnings & Sales Top Estimates, Up Y/Y
Franco-Nevada Corporation reported adjusted earnings of 58 cents per share in first-quarter 2020, up 65.7% from the prior-year quarter. Additionally, the bottom line surpassed the Zacks Consensus Estimate of 55 cents.
The company generated revenues of $241 million in the reported quarter, reflecting a year-over-year improvement of 34%. Further, the top line beat the Zacks Consensus Estimate of $234 million. In the reported quarter, 89% of revenues were sourced from gold and gold equivalents (69.4% gold, 9.2% silver, 9.4% platinum group metals and 1% from other mining assets) and 11% from energy (oil, gas and natural gas liquids).
The company sold 134,941 Gold Equivalent Ounces (GEOs) in the quarter, up from 122,049 GEOs in the prior-year quarter. The year-over-year improvement of 10.6% was driven by higher contributions from Cobre Panama, Guadalupe-Palmarejo and Hemlo, offset by lower contributions from Candelaria, Antapaccay and Sabodala mines.
During the reported quarter, adjusted EBITDA climbed 36.8% to $193 million from the $141 million witnessed in the comparable period last year.
Prices
In first-quarter 2020, the average gold price was $1,583 per ounce, 21.4% higher than the year-ago quarter. Silver prices averaged $16.90 per ounce in the quarter, up 8.5% year over year. Platinum prices went up 9.7% year over year to $903 per ounce, while palladium prices jumped 59.2% year over year to $2,284 per ounce.
Financial Position
The company had $209.8 million cash in hand as of Mar 31, 2020, up from $132.1 million reported as of Dec 31, 2019. It recorded operating cash flow of $195.2 million in the reported quarter, up from the prior-year quarter’s $143.6 million.
Franco-Nevada is debt free and uses its free cash flow to expand its portfolio and pay dividends. The company’s board has announced a quarterly dividend of 26 cents per share, marking a 4% increase from the prior dividend of 25 cents per share. This marks the 13th consecutive annual dividend increase for the company’s stakeholders.
Suspension of Guidance
Franco-Nevada has withdrawn the GEO sales guidance for the current year as its mining operators have been facing the unfavorable impact of the coronavirus outbreak, which led to temporary suspension of operations and production curtailment. It has also revoked the current-year energy revenue guidance, given the sluggish oil and gas prices. Operations at Cobre Panama and Antamina have been temporarily suspended, while Antapaccay and Candelaria continue to operate at normal levels.
Franco-Nevada’s mining revenues are likely to be affected by the production curtailments across its mining portfolio. Energy is expected to be less than 10% of the company’s current-year revenues as energy assets have been impacted by a sharp drop in commodity prices and drilling activity. Weakness across the energy sector is expected to be more than offset by strength in gold equivalent assets.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -6.49% due to these changes.
VGM Scores
Currently, Franco-Nevada has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Franco-Nevada has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.