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.
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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.