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Barrick Gold (ABX) Down 8.5% Since Earnings Report: Can It Rebound?

Zacks Equity Research
Updated

A month has gone by since the last earnings report for Barrick Gold Corporation ABX. Shares have lost about 8.5% in that time frame.

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

Barrick’s Q4 Earnings and Revenues Beat Estimates

Barrick recorded net loss (attributable to equity holders) of $314 million or 27 per share for fourth-quarter 2017 against net earnings of $425 million or 36 cents a year ago.

Barring one-time items, adjusted net earnings came in at $253 million or 22 cents per share for the quarter. Earnings per share beat the Zacks Consensus Estimate of 20 cents.

Revenues fell roughly 3.9% year over year to $2,228 million in the fourth quarter, but beat the Zacks Consensus Estimate of $2,181 million.

Cost of sales fell roughly 3% year over year to $1,411 million in the quarter.

Full-Year 2017 Results

For 2017, Barrick Gold reported adjusted net earnings of $876 million or 75 cents per share, up 7% from $818 million or 70 cents per share in 2016.

Revenues went down roughly 2.2% year over year to $8,374 million.
 
Operational Highlights

Total gold production was 1.339 million ounces in the fourth quarter, down roughly 11.7% from 1.516 million ounces a year ago.

Average realized price of gold rose 5.2% year over year to $1,280 per ounce in the quarter. AISC increased 3.3% year over year to $756 per ounce from $732 in the year-ago quarter.

Copper production decreased to 99 million pounds in the fourth quarter from 101 million pounds in the prior-year quarter. Average realized copper price was $3.34 per pound, up from $2.62 a year ago.

Financial Position

Cash and cash equivalents were $2,234 million at the end of 2017, down roughly 6.5% year over year.

During 2017, Barrick Gold reduced total debt by $1.51 billion to $6.4 billion, surpassing its target of $1.45 billion. The company plans to reduce its total debt to $5 billion by the end of 2018, using portfolio optimizing and cash flows from operations. Also, more than three-quarters of the company’s $6.4 billion of outstanding debt will not mature until 2032.

Guidance

For 2018, Barrick Gold anticipates gold production in the range of 4.5-5 million ounces at AISC of $765-$815 per ounce and cost of sales of $810-$850 per ounce.

Per the company, higher cost guidance reflects lower expected gold production from Pueblo Viejo, Veladero and Barrick Nevada, higher costs at Acacia and increased processing of higher-cost inventory.  Moreover, Barrick Gold expects gold production for the first quarter to be roughly 1 million ounces at proportionately higher costs than those anticipated for the remainder of the year, mainly due to scheduled maintenance at Pueblo Viejo and lower grades at Barrick Nevada.
 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimate. There have been three revisions lower for the current quarter.

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Barrick Gold Corporation Price and Consensus

Barrick Gold Corporation Price and Consensus | Barrick Gold Corporation Quote

VGM Scores

At this time, ABX has a poor Growth Score of F, a grade with the same score on the momentum front. However, 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.

The company's stock is suitable soley for value based on our styles scores.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Notably, ABX has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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