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Behind Goldcorp’s 5-Year Plan: What’s Influencing the Analysts

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Factors impacting Goldcorp’s estimates

Goldcorp’s (GG) management has unveiled a plan to create value for the company over the next five years by improving its production, reserves, and unit costs by 20%. Investors are probably somewhat concerned about the company’s production growth in the medium term.

The company might have reached its lowest point of operational performance, which means that it could see better prospects ahead. The execution of the new management’s goals could go a long way toward improving analyst sentiments.

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Analysts’ revenue estimates

According to the consensus estimate, Goldcorp’s revenue is expected to fall 1.7% to $3.45 billion in 2017. The production guidance downgrade in its 4Q15 results was mainly responsible for this expectation. At the midpoint, production guidance for 2017 is expected to fall 13% YoY (year-over-year).

In 2018, Goldcorp’s revenue is expected to increase from its lower base in 2017. Its estimated revenue for 2018 of $3.7 implies a YoY growth of 7.4%. The increase in revenue is expected to be driven by the company’s growth projects, which will be up and running in the medium term.

Earnings estimates

Goldcorp’s costs are expected to trend lower going forward as it focuses on increasing production. The company expects its all-in sustaining costs to fall to $700 per ounce over the next five years, as compared to $850 per ounce in 2017.

This improvement in costs will likely drive an expansion in its margins going forward. Analysts are forecasting an EBITDA (earnings before interest, tax, depreciation, and amortization) margin of 40.1% for 2017, as compared to 28.5% in 2016.

Notably, peers (SGDM) Agnico Eagle Mines (AEM), Newmont Mining (NEM), and Barrick Gold (ABX) have also shown better-than-expected cost controls.

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