Source: The Gold Report 05/11/2017
Franco-Nevada’s Q1/17 earnings beat expectations and analysts say the company is off to a good start in 2017.
Franco-Nevada Corp. (FNV:TSX; FNV:NYSE) released earnings for the first quarter of 2017 on May 9. It announced that it sold a record 131,578 gold equivalent ounces, a 23.4% increase year-over-year, and booked $172.7 million in revenue, also a record and a 30.8% year-over-year increase. The company also announced that it was raising its dividend to $0.23/share from the previous $0.22/share, the 10th consecutive annual dividend increase.
These results were welcomed by analysts. Analyst Michael Siperco of Macquarie Research wrote on May 10 that the first quarter results “continue to highlight the strength of FNV’s portfolio of 46 producing mines, 41 advanced projects and +190 exploration assets, as well as the growing oil & gas portfolio. With EBITDA margins of ~75%, we continue to view FNV as a defensive way to get precious metal exposure, while maintaining significant optionality to higher prices in the exploration/early stage portfolio and increasing dividends.”
Siperco also wrote that while Franco-Nevada trades at a premium to its peers, “we expect the premium to be maintained on continued growth from the diversified portfolio through 2020. While producers should outperform FNV (and the royalty/stream sector) if gold/silver prices rally in 2H17 (as we forecast), we believe that FNV will continue to be a core holding for investors looking for low-risk exposure to precious metals in a dividend-paying vehicle.”
Macquarie has an Outperform rating on Franco-Nevada and a target price of CA$95.
Analyst Andrew Kaip of BMO Capital Markets noted that Franco’s earnings per share of $0.26 were “well above our estimate of $0.16 and consensus of $0.22 on the back of much higher-than-expected revenue from all metal segments and Oil & Gas.” He also noted that Franco-Nevada “finished the quarter with $283M in cash and equivalents and has access to $1.1B in credit facilities.”
Kaip stated that “we believe shares of FNV should outperform peers on Q1 results and have increased our target price to $100.” Franco-Nevada is currently trading around $94.
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