Three Gold Majors: Earnings Preview

Sales of Newmont Mining, Barrick Gold and Goldcorp are expected to increase during the quarter in the range of 35% - 56% year over year and 0.3% - 13.1% quarter over quarter.
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NEW YORK (TheStreet) -- Major gold producers Newmont Mining (NEM) - Get Report, Barrick Gold (ABX) and Goldcorp (GG) are scheduled to announce their first quarter results this week on April 26, April 28 and April 28, respectively.

Sales of all three companies are expected to increase during the quarter in the range of 35% - 56% year over year and 0.3% - 13.1% quarter over quarter. However, Newmont and Barrick Gold will likely be the winners over Goldcorp.

Earnings per share of Newmont and Barrick gold are expected to increase by 33.3% and 92.5% year over year, while earnings per share of Goldcorp is expected to plunge by 32.5% year over year. In addition, Newmont and Barrick Gold are currently trading at EV to EBITDA multiples of 6.40 and 8.45 whereas Goldcorp is trading at a multiple of 15.78.

During the first quarter, Newmont Mining, Barrick Gold and Goldcorp gained around 12.2%, 2.74% and 2.7%, respectively, compared to 5.26% gain in gold spot prices on the New York Mercantile Exchange over the same period.

Newmont Mining

Newmont is the second largest gold producer in the world and has been focusing on optimizing existing operations, while evaluating new projects during the past few years. Gross margins of the company have gradually increased from 46% in 2005 to 57% in 2009.

Analysts polled by

Bloomberg

estimate the company to report earnings of 77 cents per share on sales of $2,151 million during the first quarter this year, compared to earnings of 40 cents per share on sales of $1,441 million and $1.13 per share on sales of $2,086 million in the first and fourth quarters of 2009, respectively.

Gold and copper, which respectively account for 88% and 12% of the company's revenue, have witnessed a 5.68% and 5.26% gain, during the first quarter. This will likely enable the company to post strong profits this season.

Earnings before interest, taxes, depreciation and amortization is expected to increase 83.8% to $1,101 million from $599 million for the first quarter of 2009 and 6.5% from $1,034 million for the fourth quarter of 2009.

The company expects to produce 5.3 - 5.5 million ounces of gold for 2010 at an average cost of $450 - $480 per ounce. Newmont has the advantage of mines located closer to India and China, two major gold consumers. The Asia Pacific region is expected to account for 44% of Newmont's production.

The company has the lowest EV to EBITDA ratio of 6.45 among major gold producers, in comparison with Barrick Gold's 8.45, Goldcorp's 15.79,

Kinross Gold's

(KGC) - Get Report

10.62 and

Agnico-Eagle Mines'

(AEM) - Get Report

13.73.

The stock has nine buy, nine hold, and one sell ratings, as per TheStreet's Analyst ratings guide.

Barrick Gold

This stock is among the

three precious metals we picked for this earnings season.

On Friday, UBS recommended Barrick Gold on the back of uncertainty over new projects with other gold companies. Industry experts reckon Barrick Gold to have one of the strongest pipelines.

Analysts polled by

Bloomberg

estimate the company reporting earnings of 56 cents per share on revenues of $2.4 billion, compared to 42 cents per share on revenues of $1.8 billion during the year-ago period.

Earnings before interest, taxes, depreciation and amortization is expected to zoom 72.5% to $1280 million from $742 million for the first quarter of 2009 and 19.0% from $1076 million for the fourth quarter of 2009.

Profit margin of Barrick Gold is expected to reach 53.4% during the quarter, in comparison to 41.9% and 45.4% margins registered for the first and fourth quarters of 2009.

The stock has 16 buy, seven hold, and one sell ratings, as per the TheStreet's Analyst ratings guide.

Goldcorp

After registering

gold production of 2.42 million ounces during 2009,

the company appears to be on track for another record production, supported by expansion in production at Penasquito mine, which is considered to be the most important Mexican mine for the next two decades.

During the first quarter of 2010, analysts consider the company to have made good progress through its flagship Penasquito mine in Mexico. Gold production during the quarter was around 30,700 ounces and the management anticipates the mine to yield 180,000 ounces during the current year.

A second mill line at this mine is on track to commence operations during the third quarter this year. Currently, even with just one mill line and without high-pressure rolls, Penasquito is one of the biggest precious metals mines in the world.

Cash costs of Goldcorp continue to be among the lowest in the industry. Total cash costs were $289 per ounce on a by-product basis, and $422 per ounce on a co-product basis for 2009. Newmont Mining reported total cash cost per gold ounce at $352 and $468, respectively. The leader in gold production, Barrick Gold, reported a total cash cost of $466 an ounce.

Analysts polled by

Bloomberg

expect the company to report earnings of 27 cents per share, compared to earnings of 40 cents per share and 9 cents per share in the first and fourth quarters of 2009, respectively.

The stock has 13 buy, seven hold, and one sell ratings, as per TheStreet's Analyst ratings guide.