Why Is Royal Gold (RGLD) Down 2% Since Last Earnings Report?

A month has gone by since the last earnings report for Royal Gold (RGLD). Shares have lost about 2% in that time frame, outperforming 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 Q2 Earnings and Sales Miss Estimates

Royal Gold reported earnings per share of 63 cents in second-quarter fiscal 2020 missing the Zacks Consensus Estimate of 64 cents by a whisker. The company had reported earnings per share of 36 cents in the prior-year quarter.

The company generated revenues of $123.6 million, up 26.7% year over year. This can be attributed to increase in stream revenues and higher average gold and silver prices. However, the top line missed the Zacks Consensus Estimate of $134 million. Stream revenues came in at $89.6 million, up from the year-ago quarter’s $67.7 million, driven by improvement in gold sales at Andacollo, Pueblo Viejo and Rainy River mine, and higher copper sales at Mount Milligan. However, the gain was partly offset by lower gold sales at Mount Milligan primarily due to timing of deliveries.

The company is focused on a disciplined capital allocation approach, while strengthening balance sheet by paying down debt. Further, strong operating cash flow enabled the company to raise dividend to $1.12 per share for 19th consecutive year. During the reported quarter, Royal Gold witnessed positive developments in Khoemacau project, and solid operating results at Mount Milligan and Rainy River mines.

Operational Highlights

Royal Gold reported volume of 83,500 GEOs (Gold Equivalent Ounces), which increased 4.9% from the year-earlier quarter. Average gold price was up 20.8% to $1,481 per ounce from the year-ago quarter.

The company reported cost of sales of $21 million in the reported quarter, up from the year-ago quarter’s $18 million. General and administrative expenses declined to $6.7 million from $7.4 million reported in the prior-year quarter. Operating profit came in at $53.3 million, up from the $31.4 million reported in the year-ago comparable period.

Financial Position

Net cash provided by operating activities was $78.2 million in second-quarter fiscal 2020 compared with $58.8 million in the prior-year quarter. The company ended the quarter with $80.5 million cash in hand, down from $156.5 million reported at the end of the year-ago quarter. As of the end of the reported quarter, the company’s total debt was around $129.8 million, down from $214.5 million at the end of fiscal 2019. The company paid out dividends worth $17.4 million during the reported quarter.

How Have Estimates Been Moving Since Then?

It turns out, estimates review flatlined during the past month. The consensus estimate has shifted -5.13% due to these changes.

VGM Scores

Currently, Royal Gold has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Royal Gold has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.