For Immediate Release
Chicago, IL – July 12, 2016 – Zacks Equity Research highlights Royal Gold, Inc. (RGLD) as the Bull of the Day and Oxford Industries, Inc. (OXM) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Alcoa Inc (NYSE:AA). (AA).
Here is a synopsis of all three stocks:
The gold rush is back on and Royal Gold, Inc. (RGLD) is cashing in. This Zacks Rank #1 (Strong Buy) is expected to see double digit earnings growth this year and next.
Royal Gold is not a mining company in the traditional sense. It owns precious metal royalties and streaming in 193 properties in 6 continents, including on 38 producing mines and 24 development stage projects.
This allows them to receive a percentage of the mining royalties that are produced at the mine. So it doesn't have to deal with the actual workings of the mine, including labor issues.
Estimates Rising on New Mt. Milligan Deal
On July 5, Royal Gold announced it was supporting the Centerra Gold acquisition of its largest revenue stream, Thompson Creek's Mt. Milligan.
"Under the terms of the commitment letter, Royal Gold’s 52.25% gold streaming interest at Mount Milligan will be amended, conditional and effective on closing of Centerra’s acquisition of Thompson Creek, to a 35% gold stream and 18.75% copper stream."
"Royal Gold will continue to pay $435 per ounce of gold delivered and will pay 15% of the spot price per metric tonne of copper delivered. Royal Gold estimates this amendment to be value neutral on a discounted cash flow basis, and expects about two-thirds of its future net revenue from Mount Milligan will be gold related and one-third copper related over the next ten years."
"After transition to the amended stream, Royal Gold expects that approximately 85% of its total net revenue will come from precious metals and 15% from base metals."
This mine, because it was the company's biggest revenue stream, was a huge overhang on the stock.
But now that the uncertainty has been removed, the analysts are bullish.
2 estimates have been raised since the announcement for Fiscal 2016. The Zacks Consensus Estimate has jumped to $1.15 from $1.01 in the last week.
Earnings are expected to rise 12% in fiscal 2016.
Analysts also raised estimates for fiscal 2017 with 3 moving higher in the past week. Earnings are now expected to jump to $1.63 from $1.42. That is earnings growth of 41%.
Shares Hitting New Highs
In April, Royal Gold reported revenue for fiscal third quarter jumped 26%. It also paid out record quarterly dividends of $15 million, or $0.23, per share.
That dividend is subject to change quarterly, but right now, it's yielding about 1.1%.
Even Oxford Industries, Inc. (OXM) can't defeat the recent apparel gloom. This Zacks Rank #5 (Strong Sell) saw sales at Tommy Bahama slammed in the fiscal first quarter.
Oxford Industries operates three popular, upscale apparel and accessory brands including Tommy Bahama, Lilly Pulitzer and Southern Tide. It operates e-commerce sites, through its own retail stores and also through department store channels.
Big Miss in the Fiscal First Quarter
On June 7, Oxford reported its fiscal first quarter results and missed the Zacks Consensus by 9 cents. Earnings were $1.26 compared to the consensus of $1.35.
The disappointment came in the Tommy Bahama line, which saw same store sales comps plunge 13% in its worst quarter since the third quarter of 2009, which was during the dark days of the Great Recession.
Traffic decreased in the quarter but Tommy seemed to suffer from the same malaise as a lot of other retailers: a luxury brand sickness.
Tommy's clothes and accessories sell at higher price points.
Results were better at Lilly Pulitzer, which saw same store sales comps up 1%. Lilly was so hot last year, that it's going to be hard for that brand to lap those numbers going forward.
Estimates Cut for Fiscal 2016 and Fiscal 2017
Given the disappointment to start the new year, it's not surprising that analysts cut their full year estimates.
Four estimates were cut in the last 60 days for fiscal 2016, pushing down the Zacks Consensus Estimate to $3.70 from $4.03.
The company made $3.64 in fiscal 2015 so analysts are expecting only about 1.6% earnings growth this year.
Any Good News?
There are a few bright spots for Oxford.
Inventories were kept at a reasonable level which means there doesn't have to be a fire sale at Tommy Bahama to right the ship.
Additionally, the company said in June that sales trends in the second quarter at Tommy were already much improved.
The company also recently acquired southern upscale brand Southern Tide. It is mainly an e-commerce operation but it has one store and there are plans for two more to open this year.
Additional content:
Alcoa (AA) Surprises on Q2 Earnings Beat
Minutes after the closing bell today, aluminum giant Alcoa Inc. (AA) posted a big earnings beat for its fiscal Q2. Earnings of 15 cents per share on quarterly sales of $5.3 billion, easily topped the 9 cents per share and $5251 million in revenues, respectively.
The 66% earnings beat marks the second in a row for U.S.'s top aluminum producer, but the company missed revenue estimates in Q1. Analysts had been slightly biased to the downside in estimate revisions for the second quarter in a row, as well, although the Zacks ESP was looking for a 2-cent beat for Alcoa in Q2.
Even better, perhaps, than its impressive Q2 beat is the 6% growth guidance for the second half of 2016, with double-digit growth beyond. Investors who have been patient on the raw materials side of Alcoa gaining traction the past few quarters are being rewarded today -- with aluminum pricing reportedly up 22% in Q2, the upstream (legacy) side of the business is finally seeing some solid numbers.
The other side of Alcoa, consisting of Engineered Parts and rolled aluminum products, is on track to be spun off into its own company late this year under the name Arconic. This side of the business gave Alcoa a real shot in the arm back when the company bought airplane parts maker Firth Rixson two years ago. It was the near-immediate success of this side of the business, in fact, that has led to the notion of the company splitting into two in the first place.
Now with the legacy raw materials side pulling its weight and solid growth in Alcoa's forecast, you might say the timing appears very good. Especially if global economic growth can get on sounder footing, Alcoa should be a beneficiary of this. Then again, it looks as if Wall Street is already pricing in this momentum -- the stock is up 3.75% in after-market trading following a 3% jump in regular Monday trading.
Before the Q2 earnings announcement, Alcoa was trading up nearly 27% over the last 6 months. It will be interesting to see how this and the new split-off stock will fare by this time next year.
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