Franco-Nevada (FNV) Q4 Earnings & Revenues Surpass Estimates

Franco-Nevada Corporation (TSX:FNV) reported record adjusted earnings of 59 cents per share in fourth-quarter 2019, skyrocketing 146% from the prior-year quarter. Additionally, the bottom line surpassed the Zacks Consensus Estimate of 49 cents. The stellar performance can be attributed to the start of precious metal deliveries from Cobre Panama, strong production across other key assets and higher precious metal prices.

The company also generated record revenues of $258.1 million in the reported quarter, reflecting a year-over-year improvement of 74.2%. Further, the top line beat the Zacks Consensus Estimate of $234 million. In the reported quarter, 88.4% of revenues were sourced from gold and gold equivalents (67.7% gold, 8.9% silver, 9.5% platinum group metals and 2.3% from other mining assets) and 11.6% from energy (oil, gas and natural gas liquids).

The company sold a record 153,396 Gold Equivalent Ounces (GEOs) in the quarter, up from 104,877 GEOs in the prior-year quarter. The year-over-year improvement of 46.3% was driven by Cobre Panama, Stillwater, Candelaria, Guadalupe-Palmarejo and Sudbury, offset by lower contributions from Antamina and the Goldstrike NPI.

During the reported quarter, adjusted EBITDA increased 69.9% to $201.7 million from $118.7 million in the comparable period last year.

Franco-Nevada Corporation Price, Consensus and EPS Surprise

Prices

In fourth-quarter 2019, the average gold price was $1,480 per ounce, approximately 20.5% higher than the year-ago quarter. Silver prices averaged $17.31 per ounce in the quarter, up 18.9% year over year. Platinum prices went up 10.3% year over year to $907 per ounce, while palladium prices jumped 55.6% year over year to $1,800 per ounce.

Financial Position

The company ended 2019 with $132.1 million cash in hand, up from $69.7 million reported at the end of 2018. It recorded operating cash flow of $617.7 million in 2019, up from $474.8 million in the prior year. The company’s long-term debt, as of Dec 31, 2019, was $80 million compared with $208 million, as of Dec 31, 2018.

Cobre Panama started commercial production from Sep 1, 2019, one month ahead of schedule. Cobre Panama produced 147,480 tons of copper in 2019. For the current year, it expects to produce between 285,000 tons and 310,000 tons of copper as the project continues to ramp up. Franco-Nevada expects sales between 90,000 GEOs and 110,000 GEOs for 2020.

On Jul 22, 2019, Franco-Nevada acquired a 1% overriding royalty interest on approximately 350,000 acres in the Marcellus from Range Resources Corporation (NYSE:RRC) for $300 million. The acquisition contributed revenues of $4.9 million in the December-end quarter and the asset will benefit from its first full year of revenues in 2020.

2019 Results

Franco-Nevada reported adjusted earnings per share of $1.82 in 2019, up 55.6% from the prior year’s $1.17. The reported figure beat the Zacks Consensus Estimate of $1.73.

Sales increased 29.2% year over year to $844.1 million in 2019. Also, the top-line figure outpaced the Zacks Consensus Estimate of $817.6 million. The company sold 516,438 GEOs in 2019, up 15.3% year over year.

Outlook

For 2020, Franco-Nevada anticipates attributable royalty and stream sales to total 550,000-580,000 GEOs from its mining assets and revenues between $80 million and $95 million from its energy assets. The WTI oil price and Henry Hub natural gas price are assumed to average $45 per barrel and $2.00 per mcf, respectively.

Price Performance

Franco-Nevada’s shares have gained 39.7% compared with the industry’s growth of 31.5%.

Zacks Rank & Other Stocks to Consider

Franco-Nevada currently carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the basic materials space include Daqo New Energy Corp (NYSE:DQ) , Sibanye Gold Limited (NYSE:SBSW) and Impala Platinum Holdings Limited (OTC:IMPUY) , each currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Daqo New Energy has an expected long-term earnings growth rate of 29%. The company’s shares have surged 73.2% in the past year.

Sibanye has an expected long-term earnings growth rate of 20.4%. Its shares have soared 109.5% in a year’s time.

Impala Platinum has a projected long-term earnings growth rate of 26.5%. The company’s shares have appreciated 125.3% over the past year.

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