Agnico Eagle Mines Is a Solid Bet Going Into Earnings

Agnico Eagle Mines [stock_market_widget type="inline" template="generic" color="default" assets="AEM.TO" markup="(TSX: {symbol} {currency_symbol}{price} ({change_pct}))" api="yf"] is all set to release its second-quarter results after the market closes on July 24. The stock has been in fine form on the stock market so far this year, rising nearly 27% thanks to an improvement in gold prices and the company’s solid operational execution.

So don’t be surprised to see Agnico Eagle stock soaring further after the results are released as it has been pulling the right strings to improve its business.

What to Expect?

Wall Street expects Agnico Eagle’s top line to fall nearly 10% year over year to $501.8 million. This is not surprising as Agnico Eagle has been struggling on the production front this year, but investors should not worry much about that as new mines will help the company boost its performance in due course.

Agnico Eagle’s output during the first quarter of the year came in at 398,217 ounces. This included 17,582 ounces of pre-commercial production from Meliadine. Otherwise, its production would have been lower on a year-over-year basis as compared to 389,278 ounces of gold in the first quarter of 2018.

The good news for Agnico Eagle investors is that it has managed to achieve commercial production at the Meliadine mine, as reported by a press release issued on May 31. The company expects Meliadine to deliver commercial production of approximately 230,000 ounces in 2019 at total cash costs of $612 an ounce.

So Meliadine has the potential to boost the company’s output and bottom line thanks to a favourable production profile. But this is not the only reason to be positive about Agnico Eagle going forward.

The company is looking to acquire Alexandria Minerals to further boost its output.

Given all these developments, it is not surprising to see why analysts expect Agnico Eagle’s top line to gather pace in subsequent quarters. The company’s revenue is expected to jump over 31% in the September quarter. What’s more, for the full year of 2019, analysts expect Agnico Eagle’s revenue to increase approximately 9.6%.

This will be followed by a jump of 16.7% next year, as per analysts. So the future looks bright for Agnico Eagle because of a potential improvement in the production profile and an uptick in gold prices.

Further Improvement in Gold Prices Will Be a Tailwind

Gold prices have been on a tear of late thanks to geopolitical tensions and the Federal Reserve’s leanings toward an interest rate cut. All these developments have pushed gold beyond $1,400 an ounce, and the yellow metal is expected to rise further in the coming months.

ABN AMRO believes that the price of gold could eventually hit $1,500 by next year. Kitco reports:

“Next year is expected to be a solid year for gold with prices surging to $1,500 in Q4, Boele pointed out.

“Despite our slightly bearish view for gold prices for the near term we continue to hold a positive outlook for gold prices for 2020. This is because we expect a weakening of the U.S. dollar and general easing of monetary policy,” she said.”

So it would be a good idea to remain invested in Agnico Eagle Mines going into the earnings report as its long term prospects seem bright.

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The opinions provided in this article are those of the author and do not constitute investment advice. Readers should assume that the author and/or employees of Capital 10X hold positions in the company or companies mentioned in the article. For more information, please see our Content Disclaimer.

Harsh Singh Chauhan
Harsh Singh Chauhan has a wealth of experience evaluating publicly-traded companies across several verticals, including technology, oil and gas, retail, and consumer goods. His financial writing has been published across platforms such as The Motley Fool, TheStreet, and Seeking Alpha. Harsh's philosophy is to find great businesses for the long run based on company fundamentals and industry prospects. Address: 682 Indian Road, Toronto, Ontario, M6P 2C9. Phone: 416-721-8257.
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