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Barrick's Shares Gain 11% in a Month: Time to Buy the Stock?
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Shares of Barrick Gold Corporation (GOLD - Free Report) have gained 11.1% in the past month, outperforming the Zacks Mining – Gold industry’s growth of 5%. The bullishness appears to have been catalyzed by its forecast-topping earnings performance in the second quarter and the rally in gold prices.
GOLD is currently trading at a roughly 8% discount to its 52-week high of $20.89, reached on Aug. 20, 2024, as gold prices catapulted to a record high on a surge in safe-haven demand.
Technical indicators for Barrick show strong bullish momentum. GOLD has been incessantly trading above the 200-day simple moving average (SMA) since June 18, 2024. The stock also eclipsed its 50-day SMA on Aug. 8, 2024. Notably, the 50-day SMA continues to read higher than the 200-day moving average since the golden crossover on April 29, 2024, indicating a bullish trend.
GOLD Trades Above 50-Day SMA
Image Source: Zacks Investment Research
Is the time right to buy GOLD’s shares for potential upside? Let’s take a look at the stock’s fundamentals.
Key Projects: The Fulcrum of Growth for Barrick
Barrick, one of the world’s biggest gold miners, with production of around 4.05 million ounces of gold in 2023, is well-positioned to benefit from the progress in key growth projects that should significantly contribute to its production. Its major gold and copper growth projects, including Goldrush, the Pueblo Viejo plant expansion and mine life extension, Donlin Gold, Fourmile, Lumwana Super Pit and Reko Diq, are currently in execution.
These projects are advancing per schedule as well as within budget, which underpins the next generation of profitable production. The restart of the Porgera mine would offer a further upside, supporting the company’s planned production ramp-up through 2024.
GOLD’s Strong Liquidity & Attractive Dividend Bode Well
Barrick has a robust liquidity position and generates healthy cash flows, which position it well to take advantage of attractive development, exploration and acquisition opportunities, as well as drive shareholder value and reduce debt. At the end of the second quarter of 2024, Barrick’s cash and cash equivalents were around $4 billion. It also generated an operating cash flow of $1.16 billion and a free cash flow of $340 million.
Surging gold prices should translate into strong profit margins and free cash flow generation. Gold prices are hitting record highs this year, and the yellow metal has been among the best-performing assets. Gold has rallied roughly 21% this year, driven by strong demand from central banks, a dovish Fed interest rate outlook, global uncertainties and a surge in safe-haven demand thanks to geopolitical tensions.
Prices skyrocketed to surpass the $2,500 per ounce level for the first time on Aug. 2, 2024, as ebbing inflation raised hopes of a U.S. interest rate cut in September. Increased tensions in the Middle East and concerns over an economic slowdown also fueled safe-haven demand. Prices rallied to a record high of $2,531.70 per ounce on Aug. 20, 2024, on growing Fed rate cut expectations.
GOLD offers a healthy dividend yield of 2% at the current stock price. Its payout ratio is 39% (a ratio below 60% is a good indicator that the dividend will be sustainable), with a five-year annualized dividend growth rate of 17.3%.
Higher Production Costs Weigh on Barrick
GOLD is hamstrung by higher costs, which may eat into its margins. Its cash costs per ounce and all-in-sustaining costs (AISC) — the most important cost metric of miners — increased significantly in 2023 due to lower production and sales volumes, along with unplanned costs and changes in the sales mix across different mine sites. In the second quarter, cash costs per ounce of gold increased around 10% year over year, while AISC rose roughly 11%. GOLD projects total cash costs per ounce of $940-$1,020 and AISC of $1,320-$1,420 per ounce for 2024, which indicates a year-over-year increase at the midpoint of the respective ranges. Increased mine-site sustaining capital spending and potentially steeper energy costs may lead to higher costs this year.
Valuation Looks Attractive for GOLD Stock
GOLD’s attractive valuation should beckon investors seeking value. The stock is currently trading at a forward 12-month earnings multiple of 13.19X, lower than its five-year median. This represents a roughly 14.6% discount when stacked up with the industry average of 15.44X.
Image Source: Zacks Investment Research
Barrick’s Earnings Estimates Northbound
Earnings estimates for Barrick have been going up over the past 60 days, reflecting analysts’ optimism. The Zacks Consensus Estimate for 2024 and 2025 have been revised upward over the same time frame. As earnings estimates increase, the stock is likely to follow suit.
The Zacks Consensus Estimate for earnings for 2024 is currently pegged at $1.21, suggesting year-over-year growth of 44%. Earnings are also expected to register 30.7% growth in 2025.
Image Source: Zacks Investment Research
Barrick Stock: An Underperformer
Barrick’s shares are up 6.8% year to date, underperforming the industry’s 27.5% increase and the S&P 500’s rise of 15.9%. It has also underperformed its peers, Newmont Corporation (NEM - Free Report) , Kinross Gold Corporation (KGC - Free Report) and Agnico Eagle Mines Limited (AEM - Free Report) , which have racked up a gain of 24.7%, 41.7% and 42.8%, respectively. With GOLD shares trading below its 52-week high, there is much room for upside.
GOLD’s YTD Price Performance
Image Source: Zacks Investment Research
Final Thoughts: Hold Onto GOLD Stock
Barrick’s growth initiatives, actions to boost production, solid financial health, attractive valuation and bullish technicals paint a promising picture. A healthy growth trajectory, rising earnings estimates and a safe dividend yield are the other positives. Rallying gold prices should also boost GOLD’s profitability and drive cash flow generation. Despite the upbeat growth prospects, the company’s high production costs warrant caution. Holding onto this Zacks Rank #3 (Hold) stock will be prudent for investors who already own it.
Image: Bigstock
Barrick's Shares Gain 11% in a Month: Time to Buy the Stock?
Shares of Barrick Gold Corporation (GOLD - Free Report) have gained 11.1% in the past month, outperforming the Zacks Mining – Gold industry’s growth of 5%. The bullishness appears to have been catalyzed by its forecast-topping earnings performance in the second quarter and the rally in gold prices.
GOLD is currently trading at a roughly 8% discount to its 52-week high of $20.89, reached on Aug. 20, 2024, as gold prices catapulted to a record high on a surge in safe-haven demand.
Technical indicators for Barrick show strong bullish momentum. GOLD has been incessantly trading above the 200-day simple moving average (SMA) since June 18, 2024. The stock also eclipsed its 50-day SMA on Aug. 8, 2024. Notably, the 50-day SMA continues to read higher than the 200-day moving average since the golden crossover on April 29, 2024, indicating a bullish trend.
GOLD Trades Above 50-Day SMA
Is the time right to buy GOLD’s shares for potential upside? Let’s take a look at the stock’s fundamentals.
Key Projects: The Fulcrum of Growth for Barrick
Barrick, one of the world’s biggest gold miners, with production of around 4.05 million ounces of gold in 2023, is well-positioned to benefit from the progress in key growth projects that should significantly contribute to its production. Its major gold and copper growth projects, including Goldrush, the Pueblo Viejo plant expansion and mine life extension, Donlin Gold, Fourmile, Lumwana Super Pit and Reko Diq, are currently in execution.
These projects are advancing per schedule as well as within budget, which underpins the next generation of profitable production. The restart of the Porgera mine would offer a further upside, supporting the company’s planned production ramp-up through 2024.
GOLD’s Strong Liquidity & Attractive Dividend Bode Well
Barrick has a robust liquidity position and generates healthy cash flows, which position it well to take advantage of attractive development, exploration and acquisition opportunities, as well as drive shareholder value and reduce debt. At the end of the second quarter of 2024, Barrick’s cash and cash equivalents were around $4 billion. It also generated an operating cash flow of $1.16 billion and a free cash flow of $340 million.
Surging gold prices should translate into strong profit margins and free cash flow generation. Gold prices are hitting record highs this year, and the yellow metal has been among the best-performing assets. Gold has rallied roughly 21% this year, driven by strong demand from central banks, a dovish Fed interest rate outlook, global uncertainties and a surge in safe-haven demand thanks to geopolitical tensions.
Prices skyrocketed to surpass the $2,500 per ounce level for the first time on Aug. 2, 2024, as ebbing inflation raised hopes of a U.S. interest rate cut in September. Increased tensions in the Middle East and concerns over an economic slowdown also fueled safe-haven demand. Prices rallied to a record high of $2,531.70 per ounce on Aug. 20, 2024, on growing Fed rate cut expectations.
GOLD offers a healthy dividend yield of 2% at the current stock price. Its payout ratio is 39% (a ratio below 60% is a good indicator that the dividend will be sustainable), with a five-year annualized dividend growth rate of 17.3%.
Higher Production Costs Weigh on Barrick
GOLD is hamstrung by higher costs, which may eat into its margins. Its cash costs per ounce and all-in-sustaining costs (AISC) — the most important cost metric of miners — increased significantly in 2023 due to lower production and sales volumes, along with unplanned costs and changes in the sales mix across different mine sites. In the second quarter, cash costs per ounce of gold increased around 10% year over year, while AISC rose roughly 11%. GOLD projects total cash costs per ounce of $940-$1,020 and AISC of $1,320-$1,420 per ounce for 2024, which indicates a year-over-year increase at the midpoint of the respective ranges. Increased mine-site sustaining capital spending and potentially steeper energy costs may lead to higher costs this year.
Valuation Looks Attractive for GOLD Stock
GOLD’s attractive valuation should beckon investors seeking value. The stock is currently trading at a forward 12-month earnings multiple of 13.19X, lower than its five-year median. This represents a roughly 14.6% discount when stacked up with the industry average of 15.44X.
Barrick’s Earnings Estimates Northbound
Earnings estimates for Barrick have been going up over the past 60 days, reflecting analysts’ optimism. The Zacks Consensus Estimate for 2024 and 2025 have been revised upward over the same time frame. As earnings estimates increase, the stock is likely to follow suit.
The Zacks Consensus Estimate for earnings for 2024 is currently pegged at $1.21, suggesting year-over-year growth of 44%. Earnings are also expected to register 30.7% growth in 2025.
Image Source: Zacks Investment Research
Barrick Stock: An Underperformer
Barrick’s shares are up 6.8% year to date, underperforming the industry’s 27.5% increase and the S&P 500’s rise of 15.9%. It has also underperformed its peers, Newmont Corporation (NEM - Free Report) , Kinross Gold Corporation (KGC - Free Report) and Agnico Eagle Mines Limited (AEM - Free Report) , which have racked up a gain of 24.7%, 41.7% and 42.8%, respectively. With GOLD shares trading below its 52-week high, there is much room for upside.
GOLD’s YTD Price Performance
Final Thoughts: Hold Onto GOLD Stock
Barrick’s growth initiatives, actions to boost production, solid financial health, attractive valuation and bullish technicals paint a promising picture. A healthy growth trajectory, rising earnings estimates and a safe dividend yield are the other positives. Rallying gold prices should also boost GOLD’s profitability and drive cash flow generation. Despite the upbeat growth prospects, the company’s high production costs warrant caution. Holding onto this Zacks Rank #3 (Hold) stock will be prudent for investors who already own it.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.