Why Is Kinross (KGC) Down 8.3% Since its Last Earnings Report?

A month has gone by since the last earnings report for Kinross Gold Corporation KGC. Shares have lost about 8.3% in that time frame.

Will the recent negative trend continue leading up to its next earnings release, or is KGC due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Kinross Misses Earnings and Revenue Estimates in Q4

Kinross reported net profit of $217.6 million or 17 cents per share in fourth-quarter 2017, as against a net loss of $116.5 million or 9 cents recorded in the year-ago quarter.
 
The company’s adjusted earnings (excluding one-time items) were $16.3 million or a penny per share, as against an adjusted loss of $50.9 million or 4 cents recorded a year-ago. Earnings per share lagged the Zacks Consensus Estimate of 4 cents.
 
Revenues of $810.3 million in the quarter fell around 10.2% from $902.8 million recorded in the year-ago quarter owing to lower gold equivalent ounces sold, partly offset by higher average realized gold price. Revenues missed the Zacks Consensus Estimate of $853 million.
 
Full-Year 2017 Results

For 2017, the company posted profits of $445.4 million or 36 cents per share, as against a net loss of $104 million or 8 cents a year ago. Adjusted earnings for the same period were $178.7 million or 14 cents per share, up 92.2% from $93 million or 8 cents reported in 2016.
 
Additionally, Kinross reported revenues of $3.3 billion in 2017, down around 4.9% from $3.5 billion in 2016.

Operational Performance

Attributable gold production was 652,710 ounces for the quarter, down 12.5% year over year. Production cost of sales per gold equivalent ounce declined to $653 from $712 recorded in the prior-year quarter, mainly due to lower cost of sales per ounce at Tasiast, Fort Knox and Bald Mountain. All-in sustaining cost per gold equivalent ounce sold rose to $1,019 from $1,012 a year ago.
 
Margin per gold equivalent ounce sold was $623 in the quarter, up from $505 a year ago.
 
Average realized gold prices was $1,276 per ounce in the quarter, up 4.8% from $1,217 a year ago.

Financial Review
 
Adjusted operating cash flow was $364.2 million for the quarter, increasing from $211.6 million in the prior-year quarter. Cash and cash equivalents were $1,025.8 million as of Dec 31, 2017, up from $827 million as of Dec 31, 2016.
 
Long-term debt was essentially flat year over year at $1,732.6 million and there are no scheduled debt repayments due for the company until 2021.
 
Capital expenditures rose to $313.3 million in the quarter from $226.5 million in the prior-year quarter owing to increased spending at Tasiast, Bald Mountain and Round Mountain.
 
Development Updates
 
Kinross announced that it is proceeding with the Round Mountain Phase W and Bald Mountain Vantage projects in Nevada. Kinross continues to progress with the Phase One expansion of the Tasiast mine and remains on track with its full commercial production, which is anticipated to begin by the end of June 2018. Also, the company expects to speed up the construction of Tasiast Phase Two.
 
The company expects to commence mining of high-grade ore at Moroshka in Russia. The Fort Knox Gilmore feasibility study and pre-feasibility study at Tasiast Sud are expected to be completed in 2018.

Outlook
 
For 2018, Kinross expects gold production of 2.5 million gold equivalent ounces. Production cost of sales for the year has been forecast at $730 per gold equivalent ounce. All-in sustaining cost is expected to be $975 per gold equivalent ounce.
 
Kinross sees capital expenditure of roughly $1,075 million (+/- 5%) for 2018.

How Have Estimates Been Moving Since Then?

Fresh estimates followed an upward path over the past two months. In the past month, consensus estimates have shifted by 14% due to these changes.

Kinross Gold Corporation Price and Consensus

 

Kinross Gold Corporation Price and Consensus | Kinross Gold Corporation Quote

VGM Scores

Currently, KGC has a strong Growth Score of A, though it is lagging a lot on the momentum front with a D. The stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Zacks style scores indicate that the company's stock is suitable for value and growth investors.

Outlook

KGC has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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