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Barrick Gold’s Solid 4Q16 Earnings Beat: It's Worth a Look

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Barrick Gold’s Solid 4Q16 Earnings Beat: It's Worth a Look PART 1 OF 6

Here’s What Drove Barrick Gold’s Solid 4Q16 Earnings Beat

Barrick Gold’s solid 4Q16 earnings beat

Barrick Gold (ABX) reported its 4Q16 results after the market closed on February 15, 2017. The next day, it held a conference call to go over the results with analysts.

Here&#8217;s What Drove Barrick Gold’s Solid 4Q16 Earnings Beat

Here&#8217;s What Drove Barrick Gold’s Solid 4Q16 Earnings Beat

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For 4Q16, ABX reported adjusted EPS (earnings per share) of $0.22, which was higher than the consensus estimate of $0.20. Revenue of $2.3 billion was also above expectations.

The company’s production for 2016 came in at the high end of its guidance. It even raised its dividend from $0.02 per share to $0.03. Although production fell in 2016, higher realized gold prices and lower costs led to the beat.

ABX intends to reduce its debt even further after slightly beating its target for debt reduction in 2016. It improved its production and all-in sustaining costs guidance slightly for 2017 compared to its previous guidance. You should note that its costs are already among the lowest in the industry.

The company said in its press release that it intends to file a shelf prospectus offering of $4.0 billion. But it doesn’t have any intention of offering securities under the shelf prospectus.

Price performance

Barrick Gold stock rose 5.0% in midday trading after the earnings results. Investors liked the earnings beat, dividend increase, and favorable guidance revision.

By comparison, the VanEck Vectors Gold Miners ETF (GDX) rose just 1.2%. Barrick’s major peers, Newmont Mining (NEM), Goldcorp (GG), and Agnico-Eagle Mines (AEM), returned 1.0%, 6.3%, and -3.8%, respectively.

The above graph shows the 2016 share price performances for Barrick Gold and its peers. Barrick has outperformed its nearest peers (GDX) on the strength of its higher leverage as well as its solid fundamentals.

Series overview

In this series, we’ll see how Barrick Gold’s future prospects are looking based on its recent 4Q16 earnings and management’s comments. We’ll look at the company’s production and cost performances as well as the reasons behind its improved cost guidance. Barrick Gold has shown significant improvement in its debt and cost performance over the last few quarters. We’ll see if that’s sustainable.

We’ll also take a look at Barrick Gold’s recent developments regarding asset sales and progress toward debt reduction. We’ll do this in an effort to interpret how the company’s management is trying to position itself within the context of this volatile gold price environment.

In the next part, we’ll look at Barrick Gold’s reserves and potential growth going forward.

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