Did Franco-Nevada’s 1Q16 Results Set a Solid Base for 2016?



Consensus beat

Franco-Nevada (FNV) released its 1Q16 results on May 4, 2016, after the Market closed. It held a conference call the next day. Its bottom line slightly beat analysts’ expectations with EPS (earnings per share) of $0.17. It was ahead of analysts’ expectations of $0.15. Higher-than-expected revenue mainly drove the EPS.

Precious metal miners usually outperform royalty or streaming companies in a rising metals price environment.

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Franco-Nevada’s performance

Franco’s price rose by 5.1% on May 5, 2016—compared to the 3.3% gain in the VanEck Vectors Gold Miners ETF (GDX). Investors were happy about Franco’s performance and commentary.

Among the precious metals subgroups, royalty and streaming companies substantially underperformed the other miners. This underperformance is mainly due to the lower beta these companies show over gold prices (GLD)(IAU).

Sandstorm Gold (SAND) is the top-performing royalty company with a year-to-date gain of 61% as of May 6, 2016. Next, Royal Gold (RGLD) had a gain of 60%. Franco-Nevada, Silver Wheaton (SLW), and Osisko Royalties (OKSKF) rose 50%, 56%, and 15%, respectively.

Series overview

In this series, we’ll see how Franco-Nevada’s future prospects look based on its recent 1Q16 earnings and management’s comments. We’ll look at the company’s recent streaming acquisitions and their performance. 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 metal price environment.

In the next part of this series, we’ll take a look at Franco’s production highlights for 1Q16.


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