Will IAMGOLD’s 2018 Earnings Help or Hurt Stock?

Will IAMGOLD's 2018 Earnings Help or Hurt Stock? (TSX: IAG)

IAMGOLD’s (TSX: [stock_market_widget type=”inline” template=”generic” color=”default” assets=”IMG.TO” markup=”{symbol} {currency_symbol}{price} ({change_pct})” api=”yf”]) stock price has crashed nearly 30% over the past year as investors have punished the company for its declining production profile. In fact, IAMGOLD stock sank in the double digits after it released its 2019 guidance in January, which wasn’t surprising as the company told investors to expect lower production and higher costs this year.

With that, IAMGOLD is heading into its fiscal fourth-quarter and full-year 2018 earnings report with a lot of negativity. Let’s see what its upcoming results might look like.

Low Expectations for Earnings and Guidance

The top-line estimate suggests that the company’s revenue will decline nearly 6% year over year.

IAMGOLD is expected to deliver a loss of C$0.01 per share on C$274 million in revenue. The top-line estimate suggests that the company’s revenue will decline nearly 6% year over year, but its bottom line will improve slightly as compared to the year-ago period’s loss of C$0.03 per share.

Additionally, analysts don’t expect IAMGOLD to deliver great guidance either. The company’s revenue decline is expected to accelerate in the first quarter of the new fiscal year and its profit is expected to shrink by a large margin. More specifically, IAMGOLD could witness a 15% annual revenue drop this quarter, and that will cause its earnings per share to go down from $0.09 last year to $0.01 per share this time.

Clearly, IAMGOLD investors shouldn’t expect any sort of turnaround in its fortunes when the results come out, and that’s because the company is struggling on account of a weak production profile.

IAMGOLD’s Problems Rooted in Production Costs

IAMGOLD produced 882,000 ounces of gold in 2018, which was close to the higher end of its guidance range of 850,000-900,000 ounces. However, its cash costs for 2018 are also expected at the higher end of the $750-$800 per ounce range. The same goes for the all-in sustaining costs that will arrive at the high end of the $990-$1,070 per ounce forecast.

For comparison, IAMGOLD had produced an identical 882,000 ounces of gold in 2017, though at lower cash costs of $755 per ounce and all-in sustaining costs of $1,003 an ounce. For 2019, IAMGOLD anticipates 840,000 ounces of gold production with cash costs expected to range between $765 and $815 per ounce. All-in sustaining costs will range between $1,030 and $1,080 per ounce this year.

These numbers clearly indicate why IAMGOLD’s top and bottom lines are expected to deteriorate in the current quarter, though there’s one factor that could help it spring a positive surprise.

Check out our guide to see how IAMGOLD’s gold production costs stack up against competitors.

Gold Price Increases a Potential Saviour for Stock

Gold is up 9% in the past three months, and it’s expected to rise for the remainder of the year.

Gold prices have increased by 9% in the past three months, and it is widely expected that they will keep rising for the remainder of the year. According to the MKS PAMP Group, gold prices could rise as high as $1,460 an ounce in 2019, maintaining an average of $1,355 an ounce.

The increase in gold prices will be driven by the Federal Reserve’s decision to slow its pace of monetary tightening, potential volatility in the equity markets, and the U.S.-China trade tensions. The good news is that gold prices are already trading at $1,300-plus levels, which is higher than IAMGOLD’s forecasted average gold price of $1,225 an ounce.

Assuming that gold prices continue to rise, IAMGOLD’s performance and outlook could be better-than-expected and give its stock price a shot in the arm.

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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