Which Gold Stocks Could Surprise Markets in Q2?

After the turnaround in gold prices that began at the end of 2018, the fortunes for gold stocks are also looking brighter. As compared to the SPDR Gold Shares’ (GLD) gain of 10.6%, the VanEck Vectors Gold Miners ETF (GDX) has gained 36.5%. This outperformance is not surprising given that miners usually amplify the gains and losses in the underlying commodity. In Gold Breaches $1,400: What’s the Next Stop? we discussed the drivers of gold’s price outlook.

The leverage trend is also quite clear in the more leveraged ETFs such as the Direxion Daily Gold Miners Index Bull 3X Shares ETF (NUGT) and the Direxion Daily Junior Gold Miners Index Bull 3X Shares ETF (JNUG). NUGT and JNUG have risen 138% and 152%, respectively, since the end of May. You can read Will Gold Miners Soar in the Second Half as Gold Rises? for more on gold miners’ year-to-date performances and their likely outlooks.

Gold miners’ earnings season

Gold miners’ Q2 earnings season is scheduled to start July 25. Several miners including Newmont Goldcorp (NEM), Agnico Eagle Mines (AEM), and Yamana Gold (AUY) plan to release earnings that day. Next, we’ll discuss analyst forecasts for major gold miners ahead of their Q2 results. We have discussed analyst rating sentiment for gold miners in detail in Which Gold Stocks Do Analysts Love and Hate?

Analysts’ forecasts 

Analysts’ revenue estimates for gold miners are important to track as they give us a good idea about their gold price (GLD) outlook and production.

Revenue expectations from gold stocks

Analysts expect Barrick Gold’s (GOLD) revenue to rise by 25.3% YoY and 2.5% sequentially to ~$2.14 billion in the second quarter. Barrick and Randgold’s merger was completed on January 1, 2019, which is expected to provide growth tailwinds to revenues and earnings in 2019. Without the merger, Barrick’s production would be in a state of decline.

Yamana gold revenue estimates

Analysts also estimate growth of 2.7% YoY in Yamana Gold’s (AUY) revenue for the second quarter. For 2019, however, its revenues are expected to decline by 13%. This decline is partially attributable to the company’s sale of its Chapada mine. The company released its preliminary production results, which implied production growth of 15% in Q2 2019. It also reduced its production guidance for 2019 to 1.01 million ounces from 1.06 million ounces, reflecting the sale of its Chapada mine.

Kinross Gold and Agnico Eagle

The analyst consensus is calling for Kinross Gold (KGC) to report 5.4% higher revenues YoY in the second quarter. For 2019, its revenues are expected to fall by 2.5% YoY to $3.3 billion. These expectations align with the company’s expectation of flat production growth for the year. The growth in the revenue estimate is most likely due to higher precious metal prices.

Analysts expect Agnico Eagle Mines’ (AEM) revenue to fall by 9.8% YoY in the second quarter to $501.0 million. However, many of the company’s projects are set to kick off in the second half of the year, which should support revenue. Analysts expect its revenue to rise 9.6% YoY this year.

Earnings estimates

Analysts expect Barrick Gold’s (GOLD) EBITDA to rise 35% YoY in Q2. As we’ve highlighted above, its revenues are also expected to rise by 25% in Q2. A less than proportionate increase in costs is mainly responsible for the higher EBITDA expectation.

Kinross Gold

In line with higher revenue expectations, analysts also estimate Kinross Gold to report 13.8% higher EBITDA YoY in the second quarter. This year, they expect KGC’s EBITDA to rise 15.3% YoY. A large part of this expectation is due to higher gold prices in 2019.

Agnico Eagle and Yamana Gold

Analysts expect Agnico Eagle Mines’ (AEM) EBITDA to rise by just 1.3% YoY in the second quarter, but rise 26.6% YoY to $954 million this year. The company’s profitability is expected to start climbing later this year after project completions. In May, its Meliadine mine reached commercial production, and Amaruq remains on schedule to begin production in the third quarter. On the back of these projects, Agnico expects to produce 1.75 million ounces of gold in 2019, which would be a record for the company.

The consensus is calling for flat growth for Yamana Gold’s EBITDA in the second quarter. After the start-up of its Cerro Moro mine, its earnings have flattened. This year, its EBITDA are expected to fall by 8% to $642 million mainly due to the sale of its Chapada mine and the resulting loss in production.