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Why Analysts Have Changed Their Tune on Agnico Eagle Mines

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Jan. 23 2019, Updated 10:08 a.m. ET

Analysts’ ratings for Agnico Eagle Mines

Of the 18 analysts covering Agnico Eagle Mines (AEM), 83.0% have given it “buys,” while the remaining 17.0% have given it “holds.” 

Among its mining peers (RING) (GDX), AEM has more “buy” recommendations than Yamana Gold (AUY), Barrick Gold (GOLD), Newmont Mining (NEM), and Kinross Gold (KGC), which have “buys” from 57.0%, 29.0%, 56.0%, and 40.0% of the analysts covering them, respectively.

Analysts’ sentiment for Agnico Eagle Mines has improved over the last few months. Until about a year ago, only 50.0% of analysts rated it as a “buy.”

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Rating changes

Agnico saw three rating upgrades in 2018. On October 10, Barclays initiated coverage on Agnico with an “overweight” rating. On August 9, National Bank Financial upgraded AEM to an “outperform” from a “sector perform.” RBC Capital Markets upgraded AEM from a “sector perform” to an “outperform” on July 30 and raised its target price on the stock to $55.00 from $49.00.

Earnings estimates

Analysts expect Agnico Eagle’s revenue to fall 3.5% year-over-year to $2.16 billion in 2018, mainly due to the company’s production being expected to fall. Agnico’s growth projects are expected to kick in after 2018, which should drive its production growth in 2019 and beyond. Analysts see AEM’s revenue rising 7.4% and 17.5%, respectively, in 2019 and 2020.

Agnico’s EBITDA is expected to fall 18% to $761.0 million in 2018 as a result of the company’s rising costs in 2018. As with its revenue, the company’s profitability is expected to climb in 2019 and beyond.

Analysts expect Agnico’s EBITDA to rise 19.3% in 2019 and 28.5% in 2020. These increasing margin expectations are the result of declining costs as its revenue increases. AEM’s upcoming projects should have lower costs than its current average costs, which should help its margins going forward.

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