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Mining Stocks' Q3 Earnings Lineup for Nov 6: FNV, SLCA, TAHO

We now have quarterly results from 327 members of the S&P 500 Index, which makes up 71.2% of the Index’s total market capitalization. Per the latest status as of Nov 1, these companies have put a 7.8% increase in earnings driven by 6.5% higher sales on the scoreboard. Earnings growth rate for the members that have reported is lower than growth reported by the same group in the second quarter but is in line with its four-quarter average.

Around 74.9% of these companies delivered positive earnings surprises while 65.7% surpassed revenue expectations. (Read more: All-time Record Earnings in Q3)

Taking into account all the S&P members that are yet to disclose their numbers, total earnings for the Index are expected to be up 5.6% year over year on a 5.5% increase in revenues in the third quarter. This marks a deceleration from the 11.2% increase in earnings in the second quarter and 13.6% in the first. Despite lower growth projections, total earnings in dollar amount will likely hit all-time quarterly record in the third quarter.

Further, earnings growth graph will eventually pick up fourth quarter onwards as evident from our projections. Earnings growth will be 7.3% in fourth-quarter 2017, 9.3% in first-quarter 2018, 9.2% in the second and 10.8% in third-quarter 2018. Consequently, these quarters are set to break the expected record levels in the third quarter in dollar terms.  

Overall for 2017, total earnings for the S&P 500 Index will go up 7.1% on 4.7% higher revenues, a marked improvement from the 0.7% earnings growth on 2.2% higher revenues delivered in 2016.

The Basic Materials sector, one of the 16 Zacks sectors, has reported earnings growth of 8% in the quarter so far. Around 68% of the S&P 500 members have reported their results. However, taking into account all the S&P 500 members that are yet to report, the sector will lose its momentum. Per projections, it will finish with a decline of 2.3% despite a 10.7% rise in earnings. The mining stocks fall under the Basic Material sector.

Gold gained 5% in the third quarter. Gains from a weaker US dollar and geopolitical tensions between the United States and North Korea were the main highlights. The Fed also drove gold prices during the quarter. Copper has also been on a high as supply disruptions at some of the key copper mines including BHP Billiton Limited’s BHP Escondida mine (the world's biggest copper mine) in Chile earlier this year and a strike at Freeport-McMoRan Inc.'s FCX Grasberg operations in Indonesia led to a decline in mined copper production and provided a thrust to prices. Further, reports of a potential Chinese ban on certain imports of copper scrap by the end of 2018 as part of the country’s move to reduce waste helped prop prices. This would lead to higher demand for refined copper and copper concentrate.

While China’s imports of copper scrap improved this year, the country’s demand for refined copper remains depressed. As such, a ban on scrap would result in increased imports of refined copper. In fact, the non-ferrous metal is among the best performing commodities this year.

In this write-up, we take a sneak peek into three mining stocks that are slated to report their third-quarter 2017 results on Nov 6.

Gold-focused royalty and stream company in the United States, Canada, Mexico, Peru, Chile, and Africa, Franco-Nevada Corporation FNV, will report financial results before the market opens. The company’s earnings have surpassed estimates in three of the trailing four quarters while posting in-line earnings in one. The company has an average positive earnings surprise of 13.4%.

Franco-Nevada Corporation Price and EPS Surprise
 

Franco-Nevada Corporation Price and EPS Surprise | Franco-Nevada Corporation Quote

Our proven model does not conclusively show that Franco-Nevada is likely to beat the Zacks Consensus Estimate this quarter. The company has an Earnings ESP of -1.00% as the Most Accurate estimate is 26 cents while the Zacks Consensus Estimate is pegged higher at 27 cents. Franco-Nevada currently carries a Zacks Rank #3 (Hold), which when combined with a negative ESP, makes surprise prediction difficult. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Franco-Nevada expects to meet the top end of its previously announced production guidance range of 470,000-500,000 gold equivalent ounces(or GEOs) for 2017. The company anticipates its various stream agreements to contribute 335,000-345,000 GEOs in 2017, out of the total. Revenues from oil & gas assets are expected in the band of $35-$45 million.

U.S. Silica Holdings, Inc. SLCA, which produces and sells commercial silica in the United States, will report quarterly numbers after the closing bell. The company has surpassed the Zacks Consensus Estimate in all of the trailing four quarters, resulting in a positive average earnings surprise of 23.57%.

U.S. Silica Holdings, Inc. Price and EPS Surprise
 

U.S. Silica Holdings, Inc. Price and EPS Surprise | U.S. Silica Holdings, Inc. Quote

Earlier we had expected the company to deliver an earnings beat as it had an ESP of +2.73%, but the scenario has changed with the current ESP of +0.00%. U.S. Silica Holdings has an ESP of +0.00%, as both the Most Accurate estimate and  the Zacks Consensus Estimate are pegged at 49 cents . The combination of U.S. Silica Holdings’ Earnings ESP of 0.00% and Zacks Rank #3 makes earnings prediction difficult. (Read more: Is a Beat in Store for U.S. Silica in Q3 Earnings?)

Revenues for the company’s Oil & Gas division for the third quarter is projected to increase roughly 14.9% from the second quarter as the Zacks Consensus Estimate for the third quarter is pegged at $270 million. Moreover, the Zacks Consensus Estimate for Industrial and Specialty Products division’s revenues is expected to be $57 million for the third quarter, reflecting an estimated 3.6% growth on a sequential-comparison basis.

However, inconsistent demand for sand led to lower-than-expected sand volumes in the second quarter and remains a headwind for the company in third-quarter 2017.

Tahoe Resources Inc. TAHO primarily produces copper, gold, silver, lead/zinc, and natural gas and petroleum, as well as precious metals assets.

The company has surpassed the Zacks Consensus Estimate in three of the trailing four quarters, resulting in a positive average earnings surprise of 28.7%.

Tahoe Resources, Inc. Price and EPS Surprise
 

Tahoe Resources, Inc. Price and EPS Surprise | Tahoe Resources, Inc. Quote

Tahoe Resources has an ESP of +0.00%, as both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 11 cents. The combination of Tahoe Resources’ Zacks Rank #3 and Earnings ESP of 0.00% makes earnings prediction difficult. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Taho Resources recently increased guidance for gold production to 400,000-450,000 ounces for 2017. Total cash costs and all-in sustaining costs per ounce of gold produced have been revised downward. Total cash cost estimates have been decreased by $50 per ounce to an estimated $650-$700 per ounce, reflecting the higher anticipated production levels and better-than-anticipated cost performance year to date.  All-in sustaining costs have decreased by $100 per ounce to a guidance range of $1,050-$1,150 per ounce, driven by higher production and lower capital and exploration costs.

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Franco-Nevada Corporation (FNV): Free Stock Analysis Report
 
BHP Billiton Limited (BHP): Free Stock Analysis Report
 
U.S. Silica Holdings, Inc. (SLCA): Free Stock Analysis Report
 
Freeport-McMoran, Inc. (FCX): Free Stock Analysis Report
 
Tahoe Resources, Inc. (TAHO): Free Stock Analysis Report
 
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