Why Analysts Expect Hecla Mining’s Margins to Narrow in 2017



Hecla Mining’s consensus rating

Among the silver miners (SIL) under discussion in this series, Hecla Mining (HL) has the fewest “buy” ratings, with only 18% of the analysts recommending its stock. A majority of 73% rate it as a “hold,” and only 9% rate it as a “sell.” 

Hecla Mining has not seen many rating changes in the last year. HL has a target price of $5.90, which implies a potential upside of 14.1% based on its current market price.

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Hecla Mining’s revenue estimates

According to the consensus estimates, Hecla Mining is expected to achieve revenues of $148.8 million in 3Q17, a fall of 17.0% YoY (year-over-year). This fall is also expected to continue for the entire year, as analysts expect it to decline 4.8% YoY in 2017. 

The company has seen downgrades in revenue expectations since its 1Q17 results. Hecla Mining’s production guidance was impacted by the ongoing strike at its Lucky Friday mine in northern Idaho. 

Earnings estimates

The Lucky Friday strike has also caused a hit to Hecla’s EBITDA[1. earnings before interest, tax, depreciation, and amortization] estimates. Analysts have downgraded their 2017 EBITDA estimates by 17.8% to $205.6 million in 2017, implying a YoY drop of 14.1%. Its margins are expected to narrow to 33.4% in 2017 from 37.0% in 2016.

Hecla Mining’s margins are expected to rebound in 2018 and 2019 to 38.8% and 38.6%, respectively. This forecast is backed by expectations regarding the company’s effective cost-cutting efforts and improved precious metal price (DBP) forecasts. 

However, Hecla Mining isn’t unique as far as cost-cutting efforts are concerned. Gold and silver miners IamGold (IAG), AngloGold Ashanti (AU), and First Majestic Silver (AG) are also trying to reduce their costs.


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