Silver Wheaton Earnings: An Early Look

Earnings season is winding down, with most companies already having reported their quarterly results. But there are still some companies left to report, and Silver Wheaton (NYSE: SLW  ) is about to release its quarterly earnings report. The key to making smart investment decisions with stocks releasing their quarter reports is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.

Silver Wheaton's distinctive business model has helped it benefit from the long-term rise in silver prices while also protecting it from many of the challenges that have plagued ordinary mining companies recently. Can the silver-streamer take advantage of current market conditions to build its profits even further? Let's take an early look at what's been happening with Silver Wheaton over the past quarter and what we're likely to see in its quarterly report on Thursday.

Stats on Silver Wheaton

Analyst EPS Estimate

$0.49

Change From Year-Ago EPS

19.5%

Revenue Estimate

$259.4 million

Change From Year-Ago Revenue

35%

Earnings Beats in Past 4 Quarters

1

Source: Yahoo! Finance.

Will Silver Wheaton shine itself up this quarter?
Over the past few months, analysts have soured a bit on Silver Wheaton's long-term prospects. Although consensus estimates have stayed stable for the just-ended quarter, full-year 2013 views have dropped by $0.18 per share. The stock has reflected that uncertainty, falling 18% since mid-December.

Fool readers were recently fortunate enough to benefit from Fool metals expert Christopher Barker's interview with Silver Wheaton CEO Randy Smallwood. In that interview, Smallwood said that he sees a big opportunity to expand Silver Wheaton's scope among the biggest companies in the mining industry. However, he noted that smaller companies have been trying to add price-adjustment clauses to streaming agreements, potentially forcing Silver Wheaton to accept the cost risk that it has historically avoided.

The big news for Silver Wheaton came at the beginning of February, when it announced it would partner up with Brazilian mining giant Vale (NYSE: VALE  ) in a streaming deal involving payments totaling $1.9 billion upfront. What's particularly remarkable about the deal is that it involves gold mines, with 25% of gold production from Vale's Salobo mine in Brazil and 70% of gold produced from its Canadian Sudbury mines going to Silver Wheaton at a fixed cost of $400 per ounce. Even more unprecedented for the company is the fact that Silver Wheaton gave Vale warrants to buy 10 million Silver Wheaton shares at a price of $65 at any time during the next 10 years. Smallwood assured Barker in his interview that the company still prefers silver to gold, but it's clear that Silver Wheaton's future relies on a mix of metals.

Silver prices haven't cooperated with Silver Wheaton lately. Even as the economic outlook has looked more favorable, iShares Silver Trust (NYSEMKT: SLV  ) and other silver investments have lagged behind platinum and palladium, both of which are tied a bit more to industrial demand than silver is. Still, with mining stocks seeing cost pressures and other margin-squeezing factors, Silver Wheaton's business model looks superior in the current environment.

In its quarterly report, watch for Silver Wheaton to talk in greater detail about its latest deal with Vale. As more big players become willing to make silver-streaming agreements, Silver Wheaton's prospects only grow larger, no matter which direction silver prices move in the future.

Simply put, Silver Wheaton provides a unique play on the future of silver. To stay up to date on the latest about Silver Wheaton, click here now to access The Motley Fool's premium research report on the company. You'll get free updates for the next year and much more, so don't wait -- get your copy today.

Click here to add Silver Wheaton to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.


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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 24, 2013, at 11:39 PM, JamesShaw wrote:

    There isn't a better way to learn about what's really happening on the ground at gold mines than listening directly to the CEOs themselves. The junior gold sector has been struggling recently. Brent Cook recently said on BSN that 80% of juniors won't last the next decade, which I agree with. This is also echoed in the former Franco-Nevada COO's interview I just read here: http://seekingalpha.com/article/1219881-exclusive-interview-...

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