Goldcorp Inc. (TSX:G)(NYSE:GG), one of world’s largest producers of gold, announced first-quarter earnings before the market opened on April 30, and its stock responded by falling over 6% in the day’s trading session. Let’s take a closer look at the results to see if a sell-off of this magnitude was warranted, or if we should consider using it as a long-term buying opportunity.
The results that ignited a sell-off
Here’s a summary of Goldcorp’s first-quarter earnings results compared with its results in the same period a year ago. All figures are in U.S. dollars.
| Metric | Q1 2015 | Q1 2014 |
| Adjusted Earnings Per Share | $0.01 | $0.26 |
| Revenue | $1.27 billion | $1.23 billion |
Source: Goldcorp Inc.
Goldcorp’s adjusted earnings per share decreased 96.2% and its revenue increased 3.4% compared with the first quarter of fiscal 2014. The company’s steep decline in earnings per share can be attributed to its adjusted net income decreasing 94.3% to just $12 million, which was led lower by its total mine operating costs increasing 43.6% to $942 million.
Its slight revenue growth can be attributed to its total amount of gold sold increasing 21% to 827,500 ounces, but this increase was slightly offset by the average realized price of gold decreasing by 6.2% to $1,217 per ounce and its all-in sustaining costs increasing 5.4% to $885 per ounce of gold.
Here’s a quick breakdown of 15 other notable statistics from the report compared with the year-ago period:
- Gold produced increased 6.6% to 724,800 ounces
- Silver produced decreased 11.1% to 8.52 million ounces
- Silver sold increased 14.6% to 10.54 million ounces
- Average realized price of silver decreased 13.1% to $15.30 per ounce
- Copper produced decreased 57.2% to 9.2 million pounds
- Copper sold decreased 53.3% to 15 million pounds
- Average realized price of copper decreased 20.7% to $2.45 per pound
- Lead produced decreased 25.9% to 36.7 million pounds
- Lead sold decreased 12.8% to 39.5 million pounds
- Average realized price of lead decreased 11% to $0.81 per pound
- Zinc produced decreased 6.1% to 82.5 million pounds
- Zinc sold decreased 8.3% to 82.6 million pounds
- Average realized price of zinc increased 1.1% to $0.91 per pound
- Cash flow from operating activities decreased 78.8% to $58 million
- Adjusted operating cash flow increased 30.2% to $366 million
Should you buy shares of Goldcorp today?
I think the post-earnings drop in Goldcorp’s stock was warranted, but I also think it has led to a great long-term buying opportunity because it trades at favourable valuations and pays a monthly dividend.
First, Goldcorp’s stock trades at just 24.9 times fiscal 2015’s estimated earnings per share of $0.91 and only 20.8 times fiscal 2016’s estimated earnings per share of $1.09, both of which are very inexpensive compared with its five-year average price-to-earnings multiple of 28.6.
Second, Goldcorp pays a monthly dividend of $0.05 per share, or $0.60 per share annually, giving its stock a 2.6% yield at current levels. The company has also increased its dividend four times since 2010, making it one of the top dividend-growth plays in the industry today.
With all of the information provided 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 to initiate positions.
