Goldcorp (GG +0.00%) will release its quarterly report on Thursday, and thanks to the simplicity of the business model for miners, it's not hard to predict that the report will be an ugly one. With gold prices having plunged precipitously during the second quarter, Goldcorp earnings are bound to fall in tandem with the yellow metal in a reversal of the huge run higher that the shares made during gold's bull market.
Still, in the long run, falling gold could be an opportunity for Goldcorp. As big a hit as the company will take, smaller miners with higher cost structures could get hurt even worse, and that might open the door to some lucrative strategic opportunities for Goldcorp to take advantage of. Let's take an early look at what's been happening with Goldcorp over the past quarter and what we're likely to see in its quarterly report.
Stats on Goldcorp
|
Analyst EPS Estimate |
$0.24 |
|
Change From Year-Ago EPS |
(41%) |
|
Revenue Estimate |
$1.18 billion |
|
Change From Year-Ago Revenue |
5.8% |
|
Earnings Beats in Past Four Quarters |
2 |
Source: Yahoo! Finance.
How much will Goldcorp earnings fall this quarter?
Analysts have done a number on their views of Goldcorp earnings in recent months, marking down their June-quarter estimates by nearly half and cutting $0.75 per share from their full-year 2013 consensus figures. Yet after posting severe losses going into April's gold-price swoon, the stock has stabilized, and is actually up 4% since mid-April.
Goldcorp actually came into the quarter on a negative note, reporting first-quarter earnings that disappointed investors. The company managed to earn more than $250 million, but that figure was down 37% from the year-ago quarter. Declines of 5% for prices received per gold ounce also weighed on results, with all-in costs of $1,135 per ounce roughly in line with the $1,000-$1,100 that the company projects for its full-year costs.
But much more troubling is the recent drop in the price of bullion, which sent the price of SPDR Gold (GLD 0.11%) to three-year lows and took gold prices down as far as $1,200 per ounce. That leaves Goldcorp in a select group of miners that can still make money even at those price levels, with Yamana Gold (AUY +0.00%) also reaping enough money from byproducts like copper and molybdenum to offset the costs of its gold mining and reduce its costs from an all-in amount of about $850 all the way below $400 when you include byproduct proceeds.
Another concern is whether an expected pullback in the Federal Reserve's quantitative easing program will lead to further declines for the gold market. Low interest rates have made it easy to finance gold, and cheap borrowing rates have encouraged speculation in a number of key markets. That has arguably benefited big players Goldcorp, Barrick Gold (ABX 1.32%), and Newmont Mining (NEM 2.22%) the most, as they've had the most latitude to make potentially lucrative deals to grow. Yet with fears of currency destabilization and systemic failure starting to disappear, gold's status as a safe haven of last resort is coming into question.
In the Goldcorp earnings report, watch to see how company management plans to take advantage of low gold prices. By reinvesting profits to pick up promising assets on the cheap, Goldcorp could emerge from this gold-market correction stronger than ever.
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