What Led to Barrick Gold’s 3Q16 Earnings Beat?



Barrick Gold’s 3Q16 beat

Barrick Gold (ABX) reported its 3Q16 results after the market closed on October 26, 2016. It held a conference call to discuss the results with analysts on October 27.

The company reported adjusted EPS (earnings per share) of $0.24, which was higher than the consensus estimate of $0.21. Revenues of $2.3 billion were also above expectations. While Barrick’s production fell in 3Q16, higher realized gold prices and lower costs led to the beat.

Another key takeaway from Barrick’s result was the increase in its gold production guidance as well the reduction in its cost guidance for 2016. Barrick Gold continued on its journey toward debt and cost reduction.

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Price performance

Barrick Gold stock rose 1.2% after the results due to the earnings beat and favorable guidance revision. Barrick’s major peers, Newmont Mining (NEM), Goldcorp (GG), and Agnico-Eagle Mines (AEM) also released their results that same day. Their share prices moved -3.8%, -3.7%, and 0.8%, respectively.

While Newmont missed analyst expectations, Goldcorp’s earnings per share were in line and it missed revenue expectations. Agnico-Eagle mines also slightly beat consensus expectations.

The above graph shows the year-to-date share price performance for Barrick and its peers. Barrick has outperformed its nearest peers (GDX) on the strength of its higher leverage as well as its solid fundamentals.

Series overview

In this series, we’ll see how Barrick Gold’s future prospects are looking based on its recent 3Q16 earnings and management’s comments. We’ll look at the company’s production and cost performances as well as the reasons behind its improved cost guidance. Barrick Gold has shown significant improvement in its debt and cost performance over the last few quarters. We’ll see if that’s sustainable.

We’ll also take a look at Barrick Gold’s recent developments regarding asset sales and progress toward debt reduction. 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 look at Barrick Gold’s production in 2016.


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