What to Expect When Yamana Gold Reports Earnings Next Week

Can Yamana deliver for shareholders this quarter?

| More on:
The Motley Fool

Yamana Gold (TSX: YRI)(NYSE: AUY) is scheduled to post its quarterly earnings report next Thursday. After the large drop in gold prices over the past year, investors are bracing themselves for another ugly report. However, even as other miners posted big losses, Yamana’s earnings have remained positive throughout the industry’s downturn.

In fact, the company has even taken advantage of the sector’s current doldrums to buy up assets on the cheap. Could Yamana actually exit this downturn stronger than it entered? Let’s take an early peek at what the company has been up to over the past few months and what we’re likely to see in the upcoming report.

Stats on Yamana Gold

Analysts’ EPS Estimate $0.04
Year-Ago EPS $0.07
Revenue Estimate $463.37M
Change From Year-Ago Revenue 7.60%
Earnings Beats in Past Four Quarters 1

Source: Yahoo! Finance

Can Yamana deliver for shareholders this quarter?

After gut-wrenching declines in the gold space, there’s a growing optimism among investors that a bottom is now in place. Metal prices have stabilized. Cost cuts and asset sales are also returning many companies back to profitability.

Analysts have cut their views on Yamana’s earnings substantially in recent months, cutting their second-quarter outlook by 43% and trimming another 30% off of their consensus full-year estimate. However, the share price has stabilized, up 3% over the past three months.

In June, Yamana and Agnico Eagle Mines (TSX: AEM)(NYSE: AEM) completed their joint $3.7 billion acquisition of Osisko Mining and the company’s flagship Malartic mine in Quebec. While the history of acquisitions has been terrible from the perspective of shareholders, Yamana and Agnico may have come out as winners in this transaction.

In a broad sense, the deal makes sense because it is crucial for gold miners to secure low-risk production. It has become increasingly difficult to secure large gold deposits. Miners need to purchase these assets now or face declining production profiles in the future. There has also been no better time for mid-tier producers like as Yamana and Agnico to begin buying, because most of the seniors are busy repairing their balance sheets.

For Yamana, the deal creates tax savings and reduces the company’s reliance on riskier mining jurisdictions like Argentina. The addition of a low-cost, flagship asset in Canada should help the stock get priced closer to its higher-multiple peers.

From Agnico’s point of view, the deal adds another world-class property to its asset base. Because of the Malartic mine’s proximity to the company’s nearby projects, the acquisition also creates numerous cost-saving opportunities.

This is where investors should get excited. Yamana and Agnico haven’t yet communicated how they’re going to plan and grow the Malartic mine. There are lots of opportunities to cut costs and expand production that the investment community hasn’t yet taken into account.

As the company communicates that plan to investors, the stock could be re-rated higher. While the second quarter might be too early to expect any news on this item, it’s something investors will want to watch for in the months ahead.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Robert Baillieul has no position in any stocks mentioned.

More on Investing

money cash dividends
Stocks for Beginners

Where to Invest $10,000 in April 2024

If you've already created a diversified portfolio and are looking for more options from a windfall, here is where I…

Read more »

data analyze research
Investing

The Ultimate TSX Stock to Buy With $1,000 Right Now

Brookfield Asset Management (TSX:BAM) is one of the best Canadian stocks to buy for those looking to put capital to…

Read more »

young woman celebrating a victory while working with mobile phone in the office
Dividend Stocks

3 CRA Benefits Most Canadians Can Grab in 2024

You can save on taxes by claiming the dividend tax credit on Fortis Inc (TSX:FTS) shares.

Read more »

A cannabis plant grows.
Cannabis Stocks

Canopy Growth Stock Is Rising But I’m Worried About This One Thing

Canopy Growth stock is soaring as the legalization effort makes real progress in both Germany and the United States.

Read more »

young woman celebrating a victory while working with mobile phone in the office
Investing

3 Roaring Stocks to Hold for the Next 20 Years

These top TSX stocks are excellent long-term buys, given their multi-year growth potential and solid underlying businesses.

Read more »

Two seniors float in a pool.
Dividend Stocks

TFSA: How to Earn $1,890 in Annual Tax-Free Income

Plunk these investments into your TFSA to earn passive income and avoid the taxman.

Read more »

grow dividends
Investing

Here’s My Top 3 TSX Stocks to Buy Right Now

Even though the TSX has been rising, there are still some good bargains out there. Here are three top compounding…

Read more »

Target. Stand out from the crowd
Investing

Prediction: This Canadian Growth Stock Could Double by 2030

Alimentation Couche-Tard (TSX:ATD) is a top growth stock that could do well over the next six or so years.

Read more »