Earnings Review: How Did Eldorado Gold Perform in Q3?

Eldorado Gold stock beat Wall Street’s earnings estimates in Q3 and is still trading at a discount to price target estimates.

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Canada-based gold mining company Eldorado Gold (TSX:ELD)(NYSE:EGO) announced its third-quarter results on October 28 after the market closed. The company’s gold production totaled 125,459 ounces in Q3, which was a decrease of 8% year over year when its production stood at 136,922 ounces in Q3 of 2020. Eldorado attributed the decline to a shift to lower-grade ore at Kisladag. However, gold production was up 8% on a sequential basis and remained strong for the first nine months of 2021 due to operational improvements at Kisladag.

This led to an increase in annual production guidance by 6%, as Eldorado expects to produce between 460,000 and 480,000 ounces of gold this year.

The company’s president and CEO George Burns emphasized, “In the third quarter of 2021, the company recorded strong, safe operational performance led by higher production at Kisladag, resulting in a solid quarter of cash flow generation … Our organic growth projects at existing operations remain on track with the Kisladag HPGR and Lamaque decline projects expected to be completed in the fourth quarter, allowing us to realize the benefits of these projects early next year.”

Key metrics for Eldorado Gold in Q3

In Q3, Eldorado’s free cash flow from operations fell to US$29.7 million from almost US$115 million in the year-ago quarter due to lower production volumes, lower gold prices, and an increase in capital spending. However, it was a significant improvement compared to a negative free cash flow of US$23.7 million in Q2.

The company’s AISC, or all-in sustaining costs, stood at US$1,133 per ounce, which was higher than the year-ago AISC of US$918 per ounce. The higher AISC was due to rising operating costs per ounce. Eldorado expects to maintain its AISC between US$920 million and US$1,150 per ounce in 2021.

Eldorado also reported net earnings from continuing operations of US$8.5 million, or $US0.05 per share, compared to earnings of US$46 million, or $US0.26 per share, in Q3 of 2020. Adjusted net earnings also fell to US$39.9 million, or US$0.22 per share, from US$63.6 million, or US$0.37 per share, in the year-ago period.

The company’s adjusted EBITDA stood at US$108.1 million in Q3 compared to US$164.5 million in the last year’s quarter and US$101.7 million in Q2 of 2021. Wall Street forecast the company to post adjusted earnings of US$0.18 per share in Q3.

What’s next for investors?

Shares of Eldorado Gold did not gain momentum in after-hours trading on the NYSE, despite its earnings beat. In fact, the stock surged close to 10% earlier this month, when it reported preliminary results that impressed Wall Street.

Gold stocks, including Eldorado, have underperformed the market year to date due to falling commodity prices. But this allows investors to buy stocks at a lower multiple given that gold is viewed as a hedge against inflation. The low-interest-rate environment and macro-economic uncertainties will also help drive the prices of the yellow metal higher in the future.

Eldorado stock is valued at a forward price-to-earnings multiple of 15.5, which is attractive, given the company is forecast to increase EPS by more than 22% in the next year.

Analysts tracking Eldorado Gold stock expect shares to rise by more than 50% to US$14.29 per share in the next 12 months.

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 Aditya Raghunath has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

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