Precious metals producer Coeur Mining, Inc. (CDE) in Chicago, has five wholly owned operations in North America, which include the Palmarejo gold-silver complex in Mexico, the Rochester silver-gold mine in Nevada, the Kensington gold mine in Alaska, the Wharf gold mine in South Dakota, and the Silvertip silver-zinc-lead mine in British Columbia. The company’s gold and silver production increased 2% and 6% respectively, quarter-over-quarter in its fiscal fourth quarter, ended Dec. 31, 2021, to 88,946 ounces and 2.6 million ounces, respectively, but declined from the year-ago values of 96,377 ounces and 2.8 million ounces.
However, Moody’s Investors Service (“Moody’s”) has placed CDE’s ratings (B2 CFR) under review for downgrade. Moody’s outlook represents a change from stable, due mainly to CDE’s announcement of an increase in its estimated capital cost and a delay in the completion of its Rochester mine expansion project, along with a substantial increase in its estimated operating costs at several mines in 2021 and 2022.
CDE shares have slumped 51.9% in price over the past year and 7.9% year-to-date. However, the stock has been gaining momentum lately, surging 10.2% over the past month. The stock’s price gain is likely due to the surging metal prices amid the Russia-Ukraine war because Russia being a key exporter of metals.
Click here to check out our Gold and Silver Industry Report for 2022
Here’s what could shape CDE’s performance in the near term:
Poor Profitability
CDE’s 8.32% EBIT margin is 40.6% lower than the 14.00% industry average. Also, its net income margin and levered FCF margin of negative 3.76% and 22.07%, respectively, are substantially lower than the 8.71% and 5.89% industry averages.
CDE’s ROE and ROA of negative 4.19% and 1.81%, respectively, compare with the 12.86% and 5.52% industry averages. And its ROTC is 50.6% lower than the 7.53% industry average.
Declining Financials
CDE’s revenues have declined 9% year-over-year to $207.80 million in its fiscal fourth quarter. Also, its adjusted net income and adjusted net income per share came in at negative $11.60 million and $0.05, respectively, compared to the year-ago values of $19.10 million and $0.08. And CDE’s adjusted EBITDA decreased 42% year-over-year to $48.70 million. In addition, its free cash flow stood at a negative $65.90 million, substantially down from its $29.80 million prior-year quarter value.
Unfavorable Analyst Estimates
Analysts expect CDE’s revenue to be $204.76 million in its fiscal first quarter, ending March 31, 2022, indicating a 1.1% decline year-over-year. Its revenue is expected to decrease 3.6% year-over-year to $802.72 million. And the $0.05 consensus EPS estimate for the current quarter indicates a 183.3% decline from its year-ago value. Also, its EPS is expected to decline 600% in the current year and 54.6% per annum over the next five years.
POWR Ratings Reflect This Bleak Prospects
CDE has an overall D rating, which translates to Sell in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
The stock has a D grade for Quality, which is consistent with its bleak profit margins.
CDE has an F grade for Sentiment. Unfavorable analyst sentiment about the stock justifies this grade.
Among the 45 stocks in the D-rated Miners - Diversified group, CDE is ranked #30.
Beyond what I have stated above, one can also view CDE’s grades for Stability, Growth, Momentum, and Value here.
Bottom Line
Rising metal prices are expected to benefit the company. However, its bleak financial position and lean margins are concerning. Also, considering unfavorable analyst estimates concerning its near-term financial performance, the stock looks less attractive than its peers. Thus, we think it could be best to avoid the stock now.
How Does Coeur Mining, Inc. (CDE) Stack Up Against its Peers?
While CDE has an overall POWR Rating of D, one might want to consider investing in the following Miners – Diversified stocks with an A (Strong Buy) rating: Lundin Mining (LUNMF), South32 Limited (SOUHY), and Glencore plc (GLNCY).
Click here to check out our Gold and Silver Industry Report for 2022
CDE shares rose $0.06 (+1.29%) in premarket trading Wednesday. Year-to-date, CDE has declined -7.14%, versus a -5.57% rise in the benchmark S&P 500 index during the same period.
About the Author: Subhasree Kar
Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics.
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