Randgold: Zacks’ Bear of the Day Play

Gold miners have had a rough ride in the recent past thanks to the decline in gold prices. In fact, gold miners have been more hit by the precious metal’s slide as they are considered a leveraged play on the metal.

About the Company

Randgold Resources (GOLD) is an African focused gold mining and exploration company, with its stock listed on London Stock Exchange and NASDAQ. The company operates 5 gold mines in 3 African countries.

Second Quarter Results

The company reported decent operating performance in the face of declining metal price. Group production rose 7% quarter-over-quarter, while overall total cash costs improved by 3%.  Profit was up 15% over the prior quarter.

EPS of $0.57 was ahead of the Zacks Consensus Estimate of $0.53 by about 7.5%. However, the company had missed the Zacks Consensus Estimates in the prior three quarters, with an average negative quarterly surprise of 13.4%.

Downward Revisions

Analysts have slashed their estimates for the company in view of the weak outlook. Zacks Consensus Estimates for 2015 and 2016 are now $1.97 per share and $2.18 per share respectively, down sharply from $2.43 and $3.26, before the results. These estimates translate into a projected year over year earnings decline of 21.4% for 2015.

The Worst is not over for Gold Miners

Plunge in precious metals prices has badly impacted miners. Gold in particular has fallen out of favor with investors over the past couple of years mainly due to a strong dollar and benign inflationary expectations. Most popular gold ETF GLD is down a little more than 4% this year but the gold miners ETF GDX is down almost 18%.

As the Federal Reserve gets ready to raise rates for the first time in almost a decade, the outlook for gold and its miners remains weak.

The metal and the miners have rallied after the terrible jobs report, which sharply lowered the chances for a rate hike this year. However the medium-term outlook for the shiny metal remains quite dim. Miners have more difficult times ahead with weak metals prices, rising costs and falling production.

Zacks Industry Rank of 194 out of 265 (bottom 27%) also indicates more weakness to come.

Want the latest recommendations from Zacks Investment Research? Today, you can download7 Best Stocks for the Next 30 Days.Click to get this free report >>


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s