Gold Fields Limited [stock_market_widget type="inline" template="generic" color="default" assets="GFI" markup="(NYSE: {symbol} {currency_symbol}{price} ({change_pct}))" api="yf"] is soaring high this year on the back of a favourable gold pricing environment that has sent the stock soaring towards gains of more than 50%. However, Gold Fields stock has started pulling back of late in a surprising move. The company seems to be making the right moves from a financial perspective, but that has not deterred investors from sending the stock lower.
Making the Right Noises
Gold Fields delivered a profit of $71 million, or $0.09 per share in the first half of 2019. This was a massive improvement over the prior-year period’s loss of $367 million, or $0.45 per share. The company also posted a normalized profit of $126 million for the first half of the year as compared to $43 million in the year-ago period.
Gold Fields reported revenue of $1.35 billion for the first half of the year, an increase of 2% over the prior-year period’s figure. But at the same time, the company exercised cost control that allowed it to deliver a strong bottom-line performance.
More specifically, Gold Fields’ all-in costs for the first half of the year came in at $1,106 an ounce, which was 5% lower than the year-ago period’s figure of $1,169 an ounce. The company’s output for the first half of 2019 increased 9% to 1.08 million ounces.
A combination of higher production and low costs allowed Gold Fields to deliver net cash flow of $49 million during the period. A year ago, the company had incurred a net cash outflow of $79 million. So, Gold Fields is making the right moves from a financial perspective, and it should keep getting better in light of the guidance it issued and the favourable pricing scenario.
Gold Fields Will Get Better
Gold Fields is on track to achieve its full-year guidance. The company anticipates production between 2.13 million ounces and 2.18 million ounces of gold. Its all-in sustaining costs are expected between $980 an ounce to $995 an ounce.
This should allow Gold Fields to deliver a strong bottom-line performance on account of favourable gold margins because of the yellow metal’s spot price. Gold is currently at more than $1,500 an ounce and it has the potential to move higher on account of the U.S.-China trade war.
Not surprisingly, the company is expected to deliver almost 10% revenue growth in 2019 and 2020, though it could do better if the favourable environment continues. But more importantly, the company’s bottom-line growth is expected to increase significantly. Its earnings are expected to more than triple in 2019 to $0.23 per share, and then increase to $0.39 per share in 2020.
As such, Gold Fields should be able to boost its cash flow further and also pay a nice dividend. All of this tells us that investors should buy more of Gold Fields stock as it has the potential to deliver more upside.
