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Royal Gold (RGLD) Down 7.2% Since Last Earnings Report: Can It Rebound?

Zacks Equity Research
·4-min read

A month has gone by since the last earnings report for Royal Gold (RGLD). Shares have lost about 7.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Royal Gold due for a breakout? 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 drivers.

Royal Gold's Q3 Earnings Beat, Sales Miss Estimates

Royal Gold reported adjusted earnings per share of 68 cents in third-quarter fiscal 2020 (ended Mar 31, 2020), beating the Zacks Consensus Estimate of 58 cents. The company had reported earnings per share of 42 cents in the prior-year quarter.

The company generated revenues of $136 million, up 24.3% year over year. Stream revenues increased 25.3% to $97.5 million, while royalty revenues were up 22% to $39 million, year over year. This can be attributed to the increase in average gold and silver prices, as well as a rise in gold sales at the Andacollo and Pueblo Viejo mines and higher copper sales at the Mount Milligan mine. These were partly offset by lower gold sales at Rainy River and Mount Milligan due to a decrease in deliveries. However, the top line missed the Zacks Consensus Estimate of $141 million.

Operational Highlights

Royal Gold reported volume of 86,200 GEOs (Gold Equivalent Ounces), up 2.4% from the year-earlier quarter. Average gold price was up 21.4% to $1,583 per ounce from the year-ago quarter.

The company reported cost of sales of $22 million in the fiscal third quarter, up from the year-ago quarter’s $19 million. General and administrative expenses flared up to $9.6 million from the $6.8 million reported in the prior-year quarter. Operating profit came in at $52.3 million, up from the $43.2 million reported in the year-ago period.

Financial Position

Net cash from operating activities was $99.7 million in the fiscal third quarter compared with the prior-year quarter’s $77.4 million. Royal Gold ended the quarter with $94 million cash in hand, down from the $119 million reported at the end of fiscal 2019. As of the end of the reported quarter, the company’s total debt was $100.2 million, down from the $214.5 million at the end of fiscal 2019. The company paid out dividends worth $18.4 million during the reported quarter. Royal Gold’s strong balance sheet and liquidity position place it well to navigate through the coronavirus-induced crisis. As of Mar 31, 2020, the company had $105 million outstanding and $895 million available under its revolving credit facility. In April, it withdrew $200 million from its revolving credit facility, resulting in a total of $305 million outstanding and $695 million available. The drawdown was a precautionary measure to strengthen cash position and support continued business activities.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -16.27% due to these changes.

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VGM Scores

Currently, Royal Gold has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. 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, Royal Gold has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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Zacks Investment Research