How Analysts Rate Gold Miners amid Gold Price Volatility

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Part 6
How Analysts Rate Gold Miners amid Gold Price Volatility PART 6 OF 10

Factors That Impact Goldcorp’s Earnings Estimates

Factors impacting Goldcorp’s estimates

Goldcorp’s (GG) management announced a five-year plan in 2017, allowing it to create value for the company by improving its production, reserves, and unit costs by 20%. The company’s production growth in the medium term is still a concern for the investors.

Factors That Impact Goldcorp’s Earnings Estimates

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Goldcorp might have reached its lowest point of operational performance, and it could see better prospects going forward. The execution of the new management’s goals could go a long way toward improving analyst sentiment.

Please read Goldcorp Stock Fell despite Positive 2Q17 Results for details about its current fundamentals and future outlook.

Analysts’ revenue estimates

Wall Street analysts expect Goldcorp’s revenues to fall 2.3% to ~$3.4 billion in 2017. According to the company’s production guidance for 2017, its production is expected to fall 13% YoY (year-over-year).

In 2018, analysts are projecting 6.3% growth in Goldcorp’s revenues. This increase in revenue expectations is mainly due to the company’s growth projects, which should be up and running in the medium term.

Earnings estimates

Despite an expectation of a decline in revenues for Goldcorp for 2017, analysts are projecting higher EBITDA1 margins of 43.3% compared with 30.0% for 2016. 

This trend is mainly due to the expectation of lower costs for Goldcorp as the production base increases. Goldcorp aspires to achieve all-in sustaining costs of $700 per ounce over the next five years, compared to $850 per ounce in 2017.

Notably, peers (SGDM) Agnico Eagle Mines (AEM), Newmont Mining (NEM), and Barrick Gold (ABX) have also shown better-than-expected cost controls.

  1. earnings before interest, tax, depreciation, and amortization

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