How Goldcorp’s Future Prospects Look Based on Its 2Q16 Earnings



2Q16 results

Goldcorp (GG) reported its 2Q16 results on July 27, 2016, following the Market’s closing. It held its conference call the next day to discuss the results.

The company reported EPS (earnings per share) of -$0.01, which was lower than consensus expectations of $0.02. The miss was mainly due to lower production and higher costs. The company maintained its full-year targets for production and costs.

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Relative price underperformance

The Market was not happy with Goldcorp’s results miss amid operational issues. The stock fell by 6% on July 28, 2016. In comparison, the VanEck Vectors Gold Miners ETF (GDX) was flat over the previous day.

Year-to-date, Goldcorp’s stock price had risen by 50% on an absolute basis as of July 28, 2016. However, on a relative basis, it had underperformed its peers. Barrick Gold (ABX), Kinross Gold (KGC), Newmont Mining (NEM), and Yamana Gold (AUY) had risen by 174%, 166%, 131%, and 206%, respectively, as of July 28, 2016.

Goldcorp disappointed the Market last time with its production guidance pullback. It’s a low-cost producer with a strong balance sheet, and its leverage to gold prices is lower than those of its peers, leading to its underperformance.

Series overview

In this series, we’ll see how Goldcorp’s future prospects are looking based on its recent 2Q16 earnings and management’s comments. We’ll look at the company’s production and cost performances. 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 gold price environment.

In the next part, we’ll discuss the key takeaways from Goldcorp’s earnings call.


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