It has been about a month since the last earnings report for Franco-Nevada (FNV). Shares have added about 0.9% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Franco-Nevada due for a pullback? 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 catalysts.
Franco-Nevada Q3 Earnings & Revenues Surpass Estimates
Franco-Nevada Corporation reported record adjusted earnings of 54 cents per share in third-quarter 2019, up 86% from the prior-year quarter. Additionally, the bottom line surpassed the Zacks Consensus Estimate of 45 cents. The stellar performance can be attributed to start of precious metals deliveries from Cobre Panama and addition of a new energy royalty in the Marcellus.
The company also generated record revenues of $235.7 million in the reported quarter, reflecting year-over-year improvement of 38%. Further, the top line beat the Zacks Consensus Estimate of $216 million. In the reported quarter, 84.1% of revenues were sourced from gold and gold equivalents (64.1% gold, 10.1% silver, 7.3% platinum group metals and 2.6% other mining assets) and 159% from energy (oil, gas and natural gas liquids).
The company sold a record 133,219 Gold Equivalent Ounces (GEOs) in the quarter, up from 120,021 GEOs in the prior-year quarter. The year-over-year improvement of 11% was driven by Cobre Panama, Stillwater, Hemlo, and Brucejack, which were offset by lower contributions from Antamina and Fire Creek/Midas.
During the reported quarter, adjusted EBITDA increased 43% to $193 million from $135 million in the comparable period last year.
Prices
In third-quarter 2019, average gold price was $1,474 per ounce, approximately 22% higher than the year-ago quarter. Silver prices averaged $17.00 per ounce in the quarter, up 14% year over year. Platinum prices went up 8% year over year to $883 per ounce, while palladium prices jumped 61% year over year to $1,533 per ounce.
Financial Position
The company ended the third quarter with $91.7 million cash in hand, up from $69.7 million reported at the end of 2018. It recorded operating cash flow of $433 million for the nine-month period ended Sep 30, 2019, compared with $377 million prior-year quarter. The company’s long-term debt as of Sep 30, 2017 was $242 million compared with $208 million as of Dec 31, 2018.
Franco-Nevada’s board of directors has announced a quarterly dividend of 25 cents per share. The dividend will be paid on Dec 19, to shareholders of record on Dec 5, 2019.
Significant Developments in Q3
Cobre Panama started commercial production effective as of Sep 1, 2019, one month ahead of schedule. Franco-Nevada expects deliveries in 2019 to be closer to the top end of the prior guidance of 20,000-40,000 GEOs. Further growth is expected in 2020 as the operation continues to ramp up.
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 royalty applies to existing production and future development from the Marcellus formation and future potential development from the Utica and Upper Devonian formations.
On Sep 25, 2019, Franco-Nevada acquired two royalties for $6.0 million including a 2% NSR on a property owned by Newmont Goldcorp adjoining the Musselwhite Mine and a 1.5% NSR on Nevada Gold Mines’ Rain/Emigrant and Saddle properties located at the south end of the Carlin Trend.
Outlook
For 2019, Franco-Nevada anticipates to be close to the high end of its guidance range of 490,000-500,000 GEOs. The company also anticipates generating revenues from its energy assets at the higher end of range of $100 to $115 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -6.48% due to these changes.
VGM Scores
Currently, Franco-Nevada has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Franco-Nevada has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
Franco-Nevada Corporation (FNV): Free Stock Analysis Report
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