Factors impacting Kinross’s estimates
Kinross Gold (KGC) has shown impressive operational performance in 2017. Along with steady execution on its growth projects, this trend has led the company to significantly outperform its peers (GDX) (RING) year-to-date (or YTD). This improvement occurred despite being the company a high-cost gold mining company compared to its peers. The prospects for its production growth seem strong as its projects are going as planned.
While mining peers Yamana Gold (AUY), Goldcorp (GG), and Barrick Gold (ABX) have been negatively impacted by company-specific factors, Kinross has improved its operational performance significantly, leading to outperformance in 2017.
Read Can Kinross Gold’s 2Q17 Results Sustain Its Price Momentum for a detailed discussion of its projects, costs, and production.
Analysts’ revenue estimates
According to the latest consensus estimate compiled by Thomson Reuters, analysts expect Kinross’s revenues to fall 4.3% in 2017 compared to 2016. This expected decline, however, is less than the 7.1% guided fall in production.
Its revenues are also expected to fall 0.6% in 2018. While its projects are going on planned, they are slightly longer dated. So, its production growth is expected to start about four years from now.
Unlike its revenues, Kinross’s margins are not in a declining trend. Analysts are estimating EBITDA[1. earnings before interest, tax, depreciation, and amortization] of ~$1.1 billion for 2017, implying a year-over-year rise of 7.0%. The expected rise in EBITDA in 2018 is 3.3%.
The implied margins for the company are 36.4% and 37.8% for 2017 and 2018, respectively, compared to its actual margin of 32% in 2016. The company’s costs are expected to decline as new projects come online, which have costs that are lower than the company’s average costs.