Why is Franco-Nevada (FNV) up 2.8% since its last earnings report?

A month has passed since Franco-Nevada’s (FNV) last earnings report. Shares rose about 2.8% in that time, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Franco-Nevada headed for a recession? 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 better understand the important catalysts.

France and Nevada’s first-quarter earnings beat estimates and fell y-o-y

Franco-Nevada reported adjusted earnings per share of 76 cents, beating the Zacks Consensus Estimate of 68 cents. The 4% year-over-year earnings decline is primarily due to lower sales of gold equivalent ounces (GEO) in the quarter. Notably, FNV’s adjusted net profit margin was 56.9% in Q1 2024, indicating year-over-year growth of 180 basis points.

During the reported quarter, the company generated revenue of $257 million, down 7.1% year-over-year. Higher gold prices were offset by fewer GEOs sold during the quarter. In the end-March quarter, 78.7% of revenues came from precious metals assets (62.7% gold, 9.7% silver and 3.1% platinum group metals).

During the reported quarter, FNV sold 93,018 GEO from Precious Metal assets, a 16% decline compared to the prior-year quarter. On the downside, there were lower deliveries from Cobre Panama (as the mine remains protected and safely managed) and Antamina, partially offset by higher deliveries from Antapaccay, Guadalupe-Palmarejo and Subika.

During the quarter, adjusted EBITDA declined 5.8% year-over-year to $216 million. Adjusted EBITDA margin was 84.2% for the quarter, up from 83% in Q1 2023.

Financial position

At the end of the first quarter of 2024, the company had cash on hand of USD 1.35 billion, compared to USD 1.42 billion at the end of 2023. In the first quarter of 2024, the company recorded cash flow from operating activities of USD 179 million , compared to USD 210 million at the end of 2023.

Franco-Nevada is debt-free and uses free cash flow to expand its portfolio and pay dividends. FNV currently has available capital of $2.3 billion.

The story continues

Conductivity

At the end of the fourth quarter of 2033, the Franco-Nevada region projected that in 2024, total GEO from precious metal assets will be between 480,000 and 540,000. GEO from precious metal assets is expected to be between 360,000 and 400,000. In 2023, it said the total number of GEOs would be 498,447. Forecasts indicate lower expected oil and gas prices.

How have estimates changed since then?

Estimate revisions have been increasing over the past two months.

VGM results

At this point, the Franco-Nevada region can boast a good growth score of B, which is a rating with the same result in terms of dynamics. However, the stock is rated F for value, putting it in the bottom 20% of the quintile for this investment strategy.

Overall, the stock has a Total VGM Score of C. If you’re not focused on one strategy, this score should interest you.

Perspectives

Franco-Nevada has a Zacks Rank #3 (Hold). We expect a linear rate of return on the stock over the next few months.

Industry player performance

Franco-Nevada is part of the Zacks Mining – Gold industry. Shares of Agnico Eagle Mines (AEM) in the same industry have gained 5.3% over the past month. More than a month ago, the company published its results for the quarter ended March 2024.

In the most recent quarter, Agnico reported revenues of $1.83 billion, representing a year-over-year change of +21.2%. EPS of $0.76 for the same period compared to $0.57 a year ago.

For the current quarter, Agnico is expected to report earnings per share of $0.81, representing a change of +24.6% from the prior-year quarter. The Zacks Consensus Estimate has changed +4.9% over the past 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #1 (Strong Buy) for Agnico. The stock also has a VGM Rating of C.

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