Yamana Gold (AUY) Q3 Earnings: Will The Stock Disappoint?

Yamana Gold, Inc. (NYSE:AUY) is set to release third-quarter 2016 results after the closing bell on Oct 27.

Yamana’s adjusted earnings for second-quarter 2016 were a penny per share (as against a loss of a penny per share a year ago), missing the Zacks Consensus Estimate of 2 cents. Let’s see how things are shaping up prior to this announcement.

Factors to Consider

For second-quarter 2016, Yamana Gold’s revenues were $466.5 million, compared to $455 million in the year-ago quarter resulting from higher gold sales, offset by lower silver and copper sales, and a considerably lower prices for copper.

The company’s second-quarter production was in line with its expectations and met its yearly guidance. That irregular performance at Chapada, one of the cornerstone mines, hurt production and cost in the quarter. Cash costs were impacted by the uncharacteristic events at Chapada during the quarter and by currency swings.

Yamana continues to focus on operational execution, like tracking or exceeding operational guidance, as it looks to create further value within its portfolio. This includes the ramp up of the new RDM operation towards expected steady-state production in early 2017 and development of C1 Santa Luz towards production in 2018 and Cerro Moro earlier that year.

The company is also assessing opportunities for optimizations coupled with other operational improvements across its portfolio to boost its production profile. It plans to pursue these and other organic production growth opportunities including Canadian Malartic developments and also carry out internal initiatives to surface value from dormant assets that have well-defined delineated mineral reserves and/or mineral resources.

Yamana also remains focused on balance sheet and cost improvements. It aims to cut net debt by at least $300 million by the end of 2017. The company has a total of $113 million scheduled debt payments by the end of next year.

Yamana earlier this month announced that its fully-owned subsidiary, Brio Gold has filed a preliminary prospectus with the securities regulatory authorities in connection with qualifying a secondary offering of its common shares held by Yamana that will be transferred to purchasers through and subject to the exercise of purchase rights.

Yamana plans to distribute the purchase rights to its shareholders as a dividend in-kind. The purchase rights will offer the company’s shareholders with an opportunity to purchase from Yamana a portion of its Brio Shares. The effect of the offering will be to spin-off Brio Gold as a standalone entity on the completion of the offering.

Yamana said that the spin-off will allow it to better focus on its portfolio of major producing mines and on its organic growth pipeline, and will also support its net debt reduction initiatives.

YAMANA GOLD INC Price and EPS Surprise

YAMANA GOLD INC Price and EPS Surprise | YAMANA GOLD INC Quote

Earnings Whispers

Our proven model does not conclusively show that Yamana is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP: The Earnings ESP for Yamana is -20.00% as the Most Accurate estimate stands at 4 cents while the Zacks Consensus Estimate is pegged at 5 cents.

Zacks Rank: Yamana holds a Zacks Rank #4 (Sell). We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks That Warrant a Look

Here are some other companies in the basic materials space you may want to consider as our model shows they also have the right combination of elements to post an earnings beat this quarter:

The Chemours Company (NYSE:CC) has an Earnings ESP of +25.71% and sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

B2Gold Corp. (NYSE:BTG) has an Earnings ESP of +25% and carries a Zacks Rank #2.

The Dow Chemical Company (NYSE:DOW) has an Earnings ESP of +1.25% and also carries a Zacks Rank #2.

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