Kinross Gold Corporation (TSX:K)(NYSE:KGC), one of the largest gold mining companies in the world, announced fourth-quarter earnings after the market closed on February 10, and its stock has responded by falling over 16% in the weeks since. Let’s take a closer look at the results and the company’s outlook for fiscal 2015 to determine if this weakness represents a long-term buying opportunity, or a warning sign.
Breaking down the fourth-quarter results
Here’s a summary of Kinross’ fourth-quarter earnings results compared to its results in the same period a year ago. All figures are in US dollars.
| Metric | Q4 2014 | Q4 2013 |
| Earnings Per Share | ($0.01) | ($0.02) |
| Revenue | $791.3 million | $877.1 million |
Source: Kinross Gold Corporation
In the fourth quarter of fiscal 2014, Kinross reported an adjusted net loss of $6 million, or $0.01 per share, compared to an adjusted net loss of $25.1 million, or $0.02 per share, in the year-ago period, as its revenue decreased 9.8%. The near double-digit decline in revenue can be attributed to two primary factors. First, the company sold just 651,498 ounces of gold during the quarter, a decrease of 4.7% year-over-year. Second, the average realized price of gold decreased by 5.3% to $1,201 per ounce. Its narrowed net loss can be attributed to total production costs decreasing by 11.2% to $469.2 million.
Here’s a quick breakdown of eight other notable statistics and updates from the report compared to the year-ago period:
- Produced 672,051 gold equivalent ounces, an increase of 4%
- Production costs of sales decreased 6.7% to $714 per gold equivalent ounce
- All-in sustaining costs decreased 14.4% to $1,006 per gold equivalent ounce
- Attributable margin per gold equivalent ounce sold decreased 3.2% to $487
- Adjusted operating cash flow decreased 11.3% to $197.6 million
- Adjusted operating cash flow per share decreased 10.5% to $0.17
- Capital expenditures decreased 42.8% to $189.4 million
- Ended the quarter with $983.5 million in cash and cash equivalents, an increase of 33.9%
Kinross also provided its outlook for fiscal 2015, calling for the following performance:
- The production of 2.4 million-2.6 million gold equivalent ounces
- Production costs of sales in the range of $720-$760 per gold equivalent ounce
- All-in sustaining costs in the range of $1,000-$1,100 per gold equivalent ounce
- Total capital expenditures of approximately $725 million
Should you invest in Kinross today?
Kinross Gold Corporation is one of the world’s largest gold producers, but decreased sales led it to a fairly weak fourth-quarter performance, and its stock has responded by falling over 16% in the weeks since the earnings release.
Although I think the post-earnings weakness in Kinross’ stock is warranted, I also think it has led to a long-term buying opportunity. I think this because the stock trades at low forward valuations, including just 22.7 times fiscal 2015’s estimated earnings per share of $0.15 and only 17 times fiscal 2016’s estimated earnings per share of $0.20, both of which are inexpensive compared to its five-year average price-to-earnings multiple of 24.6.
With all this information in mind, I think Kinross Gold Corporation is one of the top stocks under $5 that long-term investors should consider buying today.
