Goldcorp Inc.’s Earnings Are Out: Should You Buy, Sell, or Hold Today?

Goldcorp Inc. (TSX:G)(NYSE:GG) released fourth-quarter earnings on February 19 and its stock reacted by falling over 5%. What should investors do now?

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Goldcorp Inc. (TSX:G)(NYSE:GG), one of world’s largest and fastest growing gold producers, announced fourth-quarter earnings before the market opened on February 19, and its stock responded by falling over 5%. Let’s take a thorough look at the results and the company’s outlook for fiscal 2015 to determine if we should consider using this weakness as a long-term buying opportunity, or a warning sign.

The quarterly results are in

Here’s a summary of Goldcorp’s fourth-quarter earnings results compared to its results in the same period a year ago.

Metric Q4 2014 Q4 2013
Earnings Per Share $0.07 $0.09
Revenue $1.09 billion $1.20 billion

Source: Goldcorp Inc.

Goldcorp’s adjusted earnings per share decreased 22.2% and its revenue decrease 9.6% compared to the fourth quarter of fiscal 2013. These weak results can be largely attributed to the company selling just 707,900 ounces of gold during the quarter, a decrease of 2.5%; the average realized gold price falling to $1,203 per ounce, a decrease of 4.1%; and its all-in sustaining cash costs increasing 27.8% to $1,035 per ounce of gold compared to the year-ago quarter.

On a positive note, Goldcorp announced that it produced a record 890,900 ounces of gold in the fourth quarter of fiscal 2014, and this represented an increase of 15.9% from the 768,900 ounces produced in the year-ago period.

Here’s a quick breakdown of 12 other important statistics and updates from the report compared to the year-ago period:

  1. Produced 10,426,300 ounces of silver, an increase of 6.7%
  2. Sold 7,887,500 ounces of silver, a decrease of 11.3%
  3. Average realized silver price decreased 17.2% to $14.31 per ounce
  4. Produced 27.2 million pounds of copper, a decrease of 5.6%
  5. Sold 20.2 million pounds of copper, a decrease of 0.5%
  6. Average realized copper price decreased 12.1% to $2.82 per pound
  7. Produced 27,200 pounds of lead, a decrease of 49.3%
  8. Sold 29,400 pounds of lead, a decrease of 36.2%
  9. Average realized lead price decreased 17% to $0.83 per pound
  10. Produced 68.9 million pounds of zinc, a decrease of 14.8%
  11. Sold 84 million pounds of zinc, an increase of 9.1%
  12. Average realized zinc price increased 8.8% to $0.99 per pound

Goldcorp provided its outlook on fiscal 2015, calling for the following results:

  • The production of 3.3-3.6 million ounces of gold, an increase of approximately 20% compared to fiscal 2014
  • All-in sustaining costs in the range of $875-$950 per ounce of gold
  • Capital expenditures in the range of $1.2 billion-$1.4 billion

Should you buy Goldcorp on the dip?

Goldcorp is one of the world’s leading producers of gold, but decreased sales and increased expenses led it to a disappointing fourth-quarter performance, and its stock has reacted accordingly by falling over 5%.

Although I think the post-earnings decline in Goldcorp’s stock is warranted, I also think it has led to a great long-term buying opportunity. I think this because the stock now trades at very attractive valuations, including just 28.3 times fiscal 2015’s estimated earnings per share of $0.97 and only 24.5 times fiscal 2016’s estimated earnings per share of $1.12, both of which are inexpensive compared to its five-year average price-to-earnings multiple of 28.6 and its long-term growth potential.

With all of the information above in mind, I think Goldcorp represents one of the best long-term investment opportunities in the gold industry today. Foolish investors should take a closer look and consider using the post-earnings weakness as an opportunity to begin scaling into long-term positions.

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 Joseph Solitro has no position in any stocks mentioned.

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