Can Endeavour Silver Survive the Precious Metals Plunge?

Next Monday, Endeavour Silver (NYSE: EXK  ) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings 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.

Like most mining companies, Endeavour Silver has seen its shares crushed over the past year, with April's big sell-off in precious metals sending mining stocks on another leg downward. Will Endeavour's long-term prospects win the day? Let's take an early look at what's been happening with Endeavour Silver over the past quarter and what we're likely to see in its quarterly report.

Stats on Endeavour Silver

Analyst EPS Estimate

$0.12

Change From Year-Ago EPS

(45%)

Revenue Estimate

$71.05 million

Change From Year-Ago Revenue

45%

Earnings Beats in Past 4 Quarters

1

Source: Yahoo! Finance.

Will Endeavour Silver ever shine again?
Analysts have downgraded their assessments on Endeavour Silver's earnings dramatically in recent months, cutting their consensus for first-quarter earnings by a third and cutting $0.30 per share from their full-year 2013 estimates. The stock has suffered even more dramatically, losing more than a quarter of its value just since late January.

Endeavour has struggled along with the rest of the mining industry, as silver prices have corrected substantially from their long bull-market run in the 2000s. Weak investor demand in bullion ETF iShares Silver (NYSEMKT: SLV  ) has contributed to overall price declines that have cut the value of Endeavour's silver reserves by more than 25% just in the past three months.

Endeavour has also suffered company-specific issues. In January, the company lowered its production guidance for its key El Cubo mine. As Motley Fool contributor Christopher Barker noted at the time, former mine owner AuRico Gold (NYSE: AUQ  ) did a poor job of managing and operating El Cubo, leaving Endeavour with a massive opportunity to refurbish and expand the mine. Yet at least in the short run, the company still faces a big challenge there, especially in light of a recent fatality of a contractor employee at the mine last month.

Still, early projections of first-quarter results are promising. In early April, Endeavour gave its preliminary production figures, announcing record silver and gold production, with 1.49 million silver ounces and 15,000 gold ounces representing 39% and 138% increases year over year respectively. Yet falling realized silver and gold prices stand to decline even further in the second quarter if bullion doesn't recover soon.

In Endeavour's quarterly report, watch for the company to give more details on its decision earlier this week to make major cost-cutting initiatives, including job cuts and deferred capital investments. With the company having spent down three quarters of its cash position in 2012, the last thing investors need is for Endeavour to have to raise capital through a dilutive secondary stock offering while the stock trades at extremely low levels.

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


Read/Post Comments (1) | Recommend This Article (5)

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  • Report this Comment On May 05, 2013, at 8:56 AM, skypilot2005 wrote:

    Dan,

    Thanks for the article.

    Reference:

    http://edrsilver.com/about_us/profile/

    Endeavour Silver Corp. owns three producing silver mines in Mexico, the Guanaceví Mines operation in Durango State and the Bolañitos (formerly called Guanajuato Mines) and El Cubo mines operations in Guanajuato State.

    In 2012 these mines produced 4.5 million ounces of silver and 38,600 ounces of gold at a cash cost of $7.33 per ounce. Production in 2013 is expected to total 5.0-5.3 million ounces of silver and 47,000-49,000 ounces of gold.

    I estimate the avg. sale price between $ 30 - $31.00 oz.

    http://edrsilver.com/_resources/CorporatePresentation.pdf

    see page 5, El Cubo pgs. 25 & 45, see pg. 32

    Bradford Cooke

    http://edrsilver.com/about_us/management/

    Nice to see you evaluating mining companies.

    Sky

    Note: I’ve been “in and out” of this stock. I currently do not own it but, it is on my watch list.

    I am accumulating P. M. “Streamers” here. The share prices are just too compelling. I. M. O.

    Fellow fools; do your own D. D.

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