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Agnico Eagle Stock Rallies 35% in 3 Months: What Should Investors Do?
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Agnico Eagle Mines Limited (AEM - Free Report) shares have shot up 35.4% in the past three months. The rally has been fueled by surging gold prices and AEM’s forecast-topping earnings performance on higher realized prices and strong production.
AEM has topped the Zacks Mining – Gold industry’s 27.9% rise and the S&P 500’s decline of 6.9% over the past three months. Its gold mining peers, Barrick Gold Corporation (GOLD - Free Report) , Newmont Corporation (NEM - Free Report) and Kinross Gold Corporation (KGC - Free Report) , have rallied 24.5%, 30% and 36.1%, respectively, over the same period.
Barrick Gold’s rally has been supported by its strong financial performance, efforts to expand production and the progress of key growth projects, including Lumwana Super Pit and Reko Diq. Newmont’s gains are partly aided by the strong production performance of its managed Tier 1 portfolio. Kinross Gold’s impressive performance has been driven by its strong operational execution, advancement of growth strategy and consistent strong performance of Tasiast and Paracatu, its two biggest assets.
AEM’s 3-month Price Performance
Image Source: Zacks Investment Research
Agnico Eagle has been trading above the 200-day simple moving average (SMA) since March 4, 2024. The stock is also currently trading above the 50-day SMA, which continues to read higher than the 200-day SMA, indicating a bullish trend.
Agnico Eagle’s Shares Trade Above 50-Day SMA
Image Source: Zacks Investment Research
Let’s take a look at AEM’s fundamentals to better analyze how to play the stock.
AEM Stock Poised for Growth on Advancement of Key Projects
Agnico Eagle achieved a record annual gold production of 3,485,336 ounces in 2024, driven by higher output from Meadowbank, Canadian Malartic and Macassa. It is focused on executing projects that are expected to provide additional growth in production and cash flows. It is advancing its key value drivers and pipeline projects, including the Odyssey project in the Canadian Malartic Complex, Detour Lake, Hope Bay, Upper Beaver and San Nicolas.
The Hope Bay Project, with proven and probable mineral reserves of 3.4 million ounces, is expected to play a significant role in generating cash flow in the coming years. The processing plant expansion at Meliadine was completed and commissioned in the second half of 2024, with mill capacity expected to increase to roughly 6,250 tons per day in 2025.
The merger with Kirkland Lake Gold established Agnico Eagle as the industry's highest-quality senior gold producer. The integrated entity now has an extensive pipeline of development and exploration projects to drive sustainable growth. It also has the financial flexibility to fund a strong pipeline of growth projects.
AEM’s Solid Financial Health Supports Capital Allocation
AEM has a strong liquidity position and generates substantial cash flows, which allow it to maintain a strong exploration budget, finance a strong pipeline of growth projects, pay down debt and drive shareholder value. During 2024, Agnico Eagle upsized its revolving credit facility to $2 billion, significantly increasing its available liquidity. Its operating cash flow jumped roughly 55% year over year to record $1,132 million in the fourth quarter of 2024. AEM also generated solid fourth-quarter free cash flows of $570 million, up around 89% year over year, backed by the strength in gold prices and strong operational results. It remains focused on paying down debt using excess cash, with net debt reducing by $273 million sequentially to $217 million at the end of the fourth quarter. It reduced net debt by $1,287 million in 2024. AEM also returned around $920 million to its shareholders through dividends and repurchases last year.
Higher gold prices should boost AEM’s profitability and drive cash flow generation. Gold prices rallied roughly 27% last year, driven by strong demand from central banks, monetary easing in the United States, global uncertainties and a surge in safe-haven demand thanks to increased tensions in the Middle East and Russia. Gold prices are shooting up this year as the intense tariff war has boosted safe-haven demand for bullion. Prices hit a record high of $3,220 per ounce yesterday on safe-haven demand after the Trump administration announced that U.S. tariffs on China now effectively amount to 145%, stoking fears of deeper trade disruptions. A weaker U.S. dollar also supported the rally. High tariffs are expected to keep inflation rates high while slowing U.S. economic growth, which augurs well for gold prices. Prices of the yellow metal are already up roughly 20% this year.
Gold prices are likely to continue to gain support in an uncertain environment triggered by the tariff war. Increased purchases by central banks led by risks from Trump’s policies, hopes of interest rate cuts and geopolitical tensions are other factors expected to help the yellow metal sustain the rally.
AEM offers a dividend yield of 1.5% at the current stock price. It has a five-year annualized dividend growth rate of 10.3%. AEM has a payout ratio of 38% (a ratio below 60% is a good indicator that the dividend will be sustainable). The company's dividend is perceived to be safe and reliable, backed by strong cash flows and sound financial health.
Higher Costs Pose Concerns for Agnico Eagle
Agnico Eagle is plagued by higher production costs. In the fourth quarter of 2024, its total cash costs per ounce of gold were up roughly 4% from the previous year. All-in-sustaining costs (AISC) — the most important cost metric of miners — also rose roughly 7% year over year. AEM forecasts total cash costs per ounce in the range of $915 to $965 and AISC per ounce between $1,250 and $1,300 for 2025, suggesting a year-over-year increase at the midpoint of the respective ranges. While AEM is taking actions to control costs, the inflationary pressure is likely to continue over the near term, weighing on its profit margins and overall financial performance. Higher sustaining capital expenditures and cash costs are expected to contribute to increased AISC.
AEM’s Earnings Estimates Instill Optimism
The Zacks Consensus Estimate for AEM’s 2025 earnings has been going up over the past 60 days. The consensus estimate for first-quarter 2025 earnings has also been revised upward over the same time frame.
The Zacks Consensus Estimate for earnings for 2025 is currently pegged at $5.18, suggesting year-over-year growth of 22.5%. Earnings are expected to register roughly 56.6% growth in the first quarter.
Find the latest earnings estimates and surprises on Zacks Earnings Calendar.
Image Source: Zacks Investment Research
A Look at Agnico Eagle Stock’s Valuation
Agnico Eagle is currently trading at a forward 12-month earnings multiple of 25.52X, a roughly 70% premium to the peer group average of 15.01X. AEM is also trading at a premium to Barrick Gold, Newmont and Kinross Gold.
AEM’s P/E F12M Vs. Industry, GOLD, NEM & KGC
Image Source: Zacks Investment Research
Final Thoughts: Hold Onto AEM Stock
With a strong pipeline of growth projects, solid financial health and bullish technicals, AEM presents a compelling investment case for those seeking exposure to the gold mining space. Surging gold prices should also boost AEM’s profitability and drive cash flow generation. However, its high production costs warrant caution. AEM’s stretched valuation also might not offer an attractive entry point at this time. Balancing these factors, retaining this Zacks Rank #3 (Hold) stock would be prudent for investors who already own it.
Image: Bigstock
Agnico Eagle Stock Rallies 35% in 3 Months: What Should Investors Do?
Agnico Eagle Mines Limited (AEM - Free Report) shares have shot up 35.4% in the past three months. The rally has been fueled by surging gold prices and AEM’s forecast-topping earnings performance on higher realized prices and strong production.
AEM has topped the Zacks Mining – Gold industry’s 27.9% rise and the S&P 500’s decline of 6.9% over the past three months. Its gold mining peers, Barrick Gold Corporation (GOLD - Free Report) , Newmont Corporation (NEM - Free Report) and Kinross Gold Corporation (KGC - Free Report) , have rallied 24.5%, 30% and 36.1%, respectively, over the same period.
Barrick Gold’s rally has been supported by its strong financial performance, efforts to expand production and the progress of key growth projects, including Lumwana Super Pit and Reko Diq. Newmont’s gains are partly aided by the strong production performance of its managed Tier 1 portfolio. Kinross Gold’s impressive performance has been driven by its strong operational execution, advancement of growth strategy and consistent strong performance of Tasiast and Paracatu, its two biggest assets.
AEM’s 3-month Price Performance
Agnico Eagle has been trading above the 200-day simple moving average (SMA) since March 4, 2024. The stock is also currently trading above the 50-day SMA, which continues to read higher than the 200-day SMA, indicating a bullish trend.
Agnico Eagle’s Shares Trade Above 50-Day SMA
Let’s take a look at AEM’s fundamentals to better analyze how to play the stock.
AEM Stock Poised for Growth on Advancement of Key Projects
Agnico Eagle achieved a record annual gold production of 3,485,336 ounces in 2024, driven by higher output from Meadowbank, Canadian Malartic and Macassa. It is focused on executing projects that are expected to provide additional growth in production and cash flows. It is advancing its key value drivers and pipeline projects, including the Odyssey project in the Canadian Malartic Complex, Detour Lake, Hope Bay, Upper Beaver and San Nicolas.
The Hope Bay Project, with proven and probable mineral reserves of 3.4 million ounces, is expected to play a significant role in generating cash flow in the coming years. The processing plant expansion at Meliadine was completed and commissioned in the second half of 2024, with mill capacity expected to increase to roughly 6,250 tons per day in 2025.
The merger with Kirkland Lake Gold established Agnico Eagle as the industry's highest-quality senior gold producer. The integrated entity now has an extensive pipeline of development and exploration projects to drive sustainable growth. It also has the financial flexibility to fund a strong pipeline of growth projects.
AEM’s Solid Financial Health Supports Capital Allocation
AEM has a strong liquidity position and generates substantial cash flows, which allow it to maintain a strong exploration budget, finance a strong pipeline of growth projects, pay down debt and drive shareholder value. During 2024, Agnico Eagle upsized its revolving credit facility to $2 billion, significantly increasing its available liquidity. Its operating cash flow jumped roughly 55% year over year to record $1,132 million in the fourth quarter of 2024. AEM also generated solid fourth-quarter free cash flows of $570 million, up around 89% year over year, backed by the strength in gold prices and strong operational results. It remains focused on paying down debt using excess cash, with net debt reducing by $273 million sequentially to $217 million at the end of the fourth quarter. It reduced net debt by $1,287 million in 2024. AEM also returned around $920 million to its shareholders through dividends and repurchases last year.
Higher gold prices should boost AEM’s profitability and drive cash flow generation. Gold prices rallied roughly 27% last year, driven by strong demand from central banks, monetary easing in the United States, global uncertainties and a surge in safe-haven demand thanks to increased tensions in the Middle East and Russia. Gold prices are shooting up this year as the intense tariff war has boosted safe-haven demand for bullion. Prices hit a record high of $3,220 per ounce yesterday on safe-haven demand after the Trump administration announced that U.S. tariffs on China now effectively amount to 145%, stoking fears of deeper trade disruptions. A weaker U.S. dollar also supported the rally. High tariffs are expected to keep inflation rates high while slowing U.S. economic growth, which augurs well for gold prices. Prices of the yellow metal are already up roughly 20% this year.
Gold prices are likely to continue to gain support in an uncertain environment triggered by the tariff war. Increased purchases by central banks led by risks from Trump’s policies, hopes of interest rate cuts and geopolitical tensions are other factors expected to help the yellow metal sustain the rally.
AEM offers a dividend yield of 1.5% at the current stock price. It has a five-year annualized dividend growth rate of 10.3%. AEM has a payout ratio of 38% (a ratio below 60% is a good indicator that the dividend will be sustainable). The company's dividend is perceived to be safe and reliable, backed by strong cash flows and sound financial health.
Higher Costs Pose Concerns for Agnico Eagle
Agnico Eagle is plagued by higher production costs. In the fourth quarter of 2024, its total cash costs per ounce of gold were up roughly 4% from the previous year. All-in-sustaining costs (AISC) — the most important cost metric of miners — also rose roughly 7% year over year. AEM forecasts total cash costs per ounce in the range of $915 to $965 and AISC per ounce between $1,250 and $1,300 for 2025, suggesting a year-over-year increase at the midpoint of the respective ranges. While AEM is taking actions to control costs, the inflationary pressure is likely to continue over the near term, weighing on its profit margins and overall financial performance. Higher sustaining capital expenditures and cash costs are expected to contribute to increased AISC.
AEM’s Earnings Estimates Instill Optimism
The Zacks Consensus Estimate for AEM’s 2025 earnings has been going up over the past 60 days. The consensus estimate for first-quarter 2025 earnings has also been revised upward over the same time frame.
The Zacks Consensus Estimate for earnings for 2025 is currently pegged at $5.18, suggesting year-over-year growth of 22.5%. Earnings are expected to register roughly 56.6% growth in the first quarter.
Find the latest earnings estimates and surprises on Zacks Earnings Calendar.
A Look at Agnico Eagle Stock’s Valuation
Agnico Eagle is currently trading at a forward 12-month earnings multiple of 25.52X, a roughly 70% premium to the peer group average of 15.01X. AEM is also trading at a premium to Barrick Gold, Newmont and Kinross Gold.
AEM’s P/E F12M Vs. Industry, GOLD, NEM & KGC
Final Thoughts: Hold Onto AEM Stock
With a strong pipeline of growth projects, solid financial health and bullish technicals, AEM presents a compelling investment case for those seeking exposure to the gold mining space. Surging gold prices should also boost AEM’s profitability and drive cash flow generation. However, its high production costs warrant caution. AEM’s stretched valuation also might not offer an attractive entry point at this time. Balancing these factors, retaining this Zacks Rank #3 (Hold) stock would be prudent for investors who already own it.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.