Behind Agnico Eagle Mines’ Analyst Earnings Estimates
Factors impacting Agnico’s estimates
Agnico Eagle Mines’ (AEM) 1Q17 results were better than expected on both revenues and earnings. These results caused analysts to revise their estimates higher for the rest of the year.
Agnico is a high-quality name in gold mining and has shown consistent execution. Its operational and financial leverages are low, making it less sensitive to gold price (GLD) movements than leveraged peers (RING) Kinross Gold (KGC), Coeur Mining (CDE), Barrick Gold (ABX), IAMGOLD (IAG), and Yamana Gold (AUY).
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Analysts’ revenue estimates
Due to an expected drop in production, the analysts’ estimates for 2017 imply a year-over-year decline of 1.7% in revenues. Revenues from 2018 onward, however, are expected to take off as its project pipeline starts delivering projects.
AEM’s project pipeline is one of the strongest in the gold sector. Its revenue growth expectations for 2019 and 2020 are 7.4% and 19.6%, respectively.
Agnico’s EBITDA (earnings before interest, tax, depreciation, and amortization) also shows significant upside promise as its costs contract and revenues expand. Analysts are estimating a margin of 43% for 2017 and 45.4% for 2018, while its margins for 2019 should improve to 48.9%. Agnico’s upcoming projects should cost less than its current average costs, and this will likely help its margins going forward.