Can Iamgold Beat Earnings Expectations in 2Q16?



Missing expectations

Iamgold (IAG) has delivered EPS (earnings per share) misses for five of the last eight quarters. Analysts are expecting EPS of -$0.02 in 2Q16. The company has higher AISC (all-in sustaining costs) compared to realized prices, which should account for the negative earnings.

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EBITDA margins

Iamgold’s adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) for 1Q16 was $46 million, implying an EBITDA margin of 21%. Analysts expect IAG’s 2Q16 EBITDA to be $72 million, implying an EBITDA margin of 30.5%.

IAG had negative EBITDA in 2015. Higher margins in 2016 have come mainly on the back of higher precious metal prices. This higher proportionate change in IAG’s margins compared to its peers is the main reason for its outperformance year-to-date.

The expected EBITDA margin for 2016 is 29%. This should climb higher to 32.5% and 32.8% for 2017 and 2018, respectively. In 2016, costs are expected to be higher at its major mines. These should decline with the company’s initiatives to bring down costs. Higher gold prices are definitely one of the major tailwinds supporting higher margins.

Iamgold’s peers

Iamgold’s peers (RING) such as Eldorado Gold (EGO), New Gold (NGD), Newmont Mining (NEM), and Barrick Gold (ABX) are trying hard to reduce their costs in order to manage volatility in precious metal prices.


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