Gold Stocks' Q2 Earnings Lined Up For Aug 3: GORO, IAG, SAND

This year, gold has been the best performing asset, trumping major equity indices, investment grade and high-yield bonds and commodity indices. The yellow metal has gained 26% year to date, with current prices reigning above the $1,300 mark.

The rally in gold prices was primarily fuelled by the slowdown in China. Further, volatile equity markets and introduction of negative interest rates by several central banks (including Japan) have spurred safe-haven demand for gold. Gold prices also benefited from strong investment inflows. This safe-haven asset has gained both pre- and post-Brexit chaos. The U.S. Federal Reserve’s dovish stance has been another major factor that has helped gold retain its shine. A delay in raising interest rates elevates demand for gold, which produces no income, but relies on price appreciation to attract investors.

The gold mining industry is grouped under the Basic Material sector – one of the 16 broad Zacks sectors. 65% of the companies in this sector that have reported so far put up a 5.9% fall in earnings on the scoreboard. Considering the companies that are yet to report, the sector’s earnings are expected to drop 10.6% in the quarter.

However, it is not the only sector to suffer an earnings decline this quarter. Earnings growth is anticipated to be in the negative territory for 9 of the 16 Zacks sectors, with Energy being the biggest laggard. Looking at the projections for the quarter, total S&P 500 earnings are expected to be down 3.4% on a 0.4% dip in revenues. It seems the quarter is on track to be the fifth quarter in a row to suffer an earnings decline. (Read more: Q2 Earnings Trends Already Established?).

Let’s see what’s in store for the gold miners that are set to report quarterly numbers on Aug 3, 2016.

Gold Resource Corp (NYSE:GORO) – a gold and silver producer with operations in Oaxaca, Mexico and exploration in Nevada, USA – is expected to release its second-quarter results on Aug 3 before the market opens. The company has an average negative earnings surprise of 85.71% over the trailing four quarters.

Gold Resource recently reported preliminary production results of approximately 10,011 ounces of gold, 572,500 ounces of silver and significant base metals for the second quarter. It maintains its 2016 Annual Outlook of 26,000 gold ounces, 1,900,000 silver ounces, 1,100 tons of copper, 3,200 tons of lead and 12,900 tons of zinc.

Gold Resource has a Zacks Rank #3 (Hold) and an Earnings ESP of 0.00% which make surprise prediction difficult.

IAMGOLD Corp. (TO:IAG) is engaged in the exploration, development and operation of gold as well as copper and silver. It is slated to report its second-quarter numbers on Aug 3, after the market closes. The company delivered a positive earnings surprise of 60% in the last quarter. IAMGOLD has a negative earnings surprise of 9.70% over the trailing four quarters.

All-in sustaining costs for the company are expected to move lower in the second half of the year. In the second quarter, production will be slightly lower than the first quarter due to seasonal factors, but will eventually pick up in the second half of the year. We expect IAMGOLD to come up with a positive earnings surprise this season backed by its Zacks Rank #1 (Strong Buy) and Earnings ESP of +75.00%.

Sandstorm Gold Ltd. (NYSE:SAND) concentrates on acquiring gold and other precious metal purchase agreements and royalties from companies that have advanced stage development projects or operating mines. The company is set to report second-quarter earnings on Aug 3. It delivered a positive earnings surprise of 500% in the last quarter. Sandstorm Gold has posted an average negative earnings surprise of 200% over the trailing four quarters.

The company has sold approximately 12,500 attributable gold equivalent ounces during second-quarter 2016. We expect Sandstorm Gold to come up with a positive earnings surprise this season backed by its Zacks Rank #1 and Earnings ESP of +100.00%.