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How Analysts Rate Gold Miners amid Gold Price Volatility

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Part 5
How Analysts Rate Gold Miners amid Gold Price Volatility PART 5 OF 10

Factors That Are Baked into Goldcorp’s Ratings

Wall Street ratings

On September 6, 2017, 40% of analysts covering Goldcorp (GG) recommended a “buy” on the stock. The company has “hold” recommendations from 55% of the analysts covering it, according to the consensus compiled by Thomson Reuters. One year ago, more than 60% of the analysts were recommending a “buy” for the stock. 

The company reset the investors’ expectations for production and costs after a management change. This reset led to weaker-than-expected production growth in the short to medium term, which led the stock to underperform and analysts to turn away.

Factors That Are Baked into Goldcorp’s Ratings

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Rating changes

The latest recommendation change for Goldcorp stock was in July 2017, which came from National Bank Financial. The firm downgraded Goldcorp from “outperform” to “sector perform.”

In March 2017, RBC Capital Markets upgraded GG from “underperform” to “sector perform.” The upgrade was due to the pullback in the stock’s price, which, in RBC’s opinion, offered attractive returns.

Other changes

In August 2017, Jefferies Group reduced its fiscal 2017 earnings per share estimate for Goldcorp from $0.39 to $0.38. The firm has a “hold” rating on the stock with a price target of $13.00.

After Goldcorp’s 2Q17 results, Raymond James analyst Farooq Ahmed believed that the company should be able to reach its 2017 forecast, based on its year-to-date performance. However, he appears to be concerned about the company’s addition of $75 million in net debt sequentially in 2Q17.

Morgan Stanley stated in its initial investment thesis that Goldcorp could offer better risk-to-reward outlooks than Barrick Gold (ABX) and Newmont Mining (NEM).

Citi expects only three miners (GDX)—Polymetal International, Randgold Resources (GOLD), and Goldcorp—to deliver positive production compound annual growth rates (or CAGR) over the next five years.

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