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Is the Analyst Sentiment for Hecla Mining Improving?

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Improving sentiment for Hecla Mining?

Out of all the silver miners (SIL) under discussion in this series, Hecla Mining (HL) has among the fewest “buy” ratings, with only 45% of analysts recommending its stock—just above Tahoe Resources’ (TAHO) 43% “buy” ratings.

An equal percentage of analysts recommend “holds,” while 10% recommend “sells” on HL. Analysts’ optimism for the stock has, however, risen significantly. Until October 2017, only 20% of analysts recommended “buys” on HL.

On December 4, 2017, Cantor Fitzgerald initiated a “buy” on HL stock. Its analyst sees near-term momentum for the stock due to the strike resolution at Lucky Friday and the company’s refinancing of its long-term debt. On November 30, 2017, B. Riley upgraded HL from a “neutral” to a “buy.”

HL has a target price of $5.10, which implies a potential upside of 28.5% based on its current market price.

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Hecla Mining’s revenue estimates

According to the consensus estimate, Hecla Mining is expected to achieve revenue of $586.3 million in 2018, a rise of 1.5% YoY (year-over-year). Its revenue is also expected to accelerate much faster beyond 2018.

Analysts’ estimates imply a growth rate of 18.2% YoY for HL’s revenue in 2019. While the strike at the Lucky Friday mine affected the company’s operations, many pockets of strength are driving its future production outlook.

Earnings estimates

The Lucky Friday strike also caused Hecla’s EBITDA (earnings before interest, tax, depreciation, and amortization) estimates to take a hit. Its EBITDA is expected to fall 28.3% YoY in 2018 to $168.5 million. This estimate has affected its margins as well. While the company generated an EBITDA margin of 40.7% in 2017, it’s expected to contract to 28.7% in 2018. However, 2019 seems like a turnaround year for Hecla. Along with its revenue, Hecla’s EBITDA is expected to rise 36% YoY with a margin of 33.1%.

This forecast is backed by expectations of improved precious metals prices (DBP) and the company’s effective cost-cutting efforts.

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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