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What’s Driving Higher Earnings Estimates for First Majestic Silver?

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Jun. 27 2016, Updated 11:07 a.m. ET

Share price strength

Along with Coeur Mining (CDE), First Majestic Silver’s (AG) stock has been one of the best performers in 2016. It’s one of the leading pure-play silver producers. While silver prices (SLV) have provided a nice tailwind to the stock in 2016, its operating performance also remains strong with the first quarter of 2016 tracking above the full year guidance of 2016. In this context, we’ll see how analysts have revised their revenue and earnings estimates for the company.

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First Majestic estimates

Analysts are projecting revenue of $292 million for 2016, which is an upward revision of 34% since the start of 2016. Its EBITDA (earnings before interest, tax, depreciation, and amortization) has also risen by the same percentage. The revenue estimates for 2016 imply year-over-year (or YoY) growth of 33% while EBITDA is expected to grow by an impressive 63%. The higher rise in EBITDA as compared to revenues is attributable to stable costs.

Internal growth opportunities

First Majestic raised 50 million Canadian dollars in 2016, which should help it to explore internal growth opportunities. This is also a reason that analysts have been turning positive on the stock.

Other precious metal producers (SIL) (GDX) such as Coeur Mining (CDE), Newmont Mining (NEM), and AngloGold Ashanti (AU) have also been exploring ways to increase their production profile. If the precious metal prices remain at current levels for longer, the companies will again start considering the projects, which were earlier dismissed as economically unviable.

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