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Why Shares of Eldorado Gold Are Falling Today

By Scott Levine – Oct 29, 2021 at 6:05AM

Key Points

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This gold producer isn't shining brightly today.

What happened

While the market seemed enthusiastic about gold producer Eldorado Gold (EGO -0.96%) a couple of weeks ago, investors are recognizing the company as a less lustrous opportunity today after it reported mixed third-quarter earnings.

As of 11:38 a.m. EDT, Eldorado Gold's stock has dipped 6.6%, recovering from a steeper decline of 10.1% earlier in the trading session.

An unhappy woman holds her head while sitting at a desk.

Image source: Getty Images.

So what

Although Eldorado Gold exceeded analysts' expectations by 22%, reporting adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $0.22 per share, the story on the top line glittered less brightly in investors' eyes. Whereas analysts were looking for Eldorado Gold to report Q3 revenue of $248.1 million, the company booked sales of only $238.4 million.

Besides the income statement, the company's cash flow statement provided an additional disappointment: The company's free cash flow dwindled from $114.7 million in Q3 2020 to $29.7 million in the recently completed quarter. Management attributed the decrease to a variety of factors including lower gold production, lower gold prices, and an increase in capital expenditures.

It wasn't all bad news, though. As expected, Eldorado Gold raised its 2021 gold production guidance. Whereas it had initially forecast gold production of 430,000 ounces to 460,000 ounces, the company now projects gold production of 460,000 ounces to 480,000 ounces. While the company expects to dig more of the yellow stuff out of the ground than it had previously estimated, all-in sustaining costs guidance remained unchanged at $920 to $1,150 per gold ounce.

Now what

While the company's Q3 2021 earnings report was hardly catastrophic, investors mining the market for gold opportunities may want to look elsewhere, as the company continues to face challenges, such as the uncertainty surrounding the development of the Skouries project in Greece.  

Scott Levine has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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