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Should Eldorado Gold Be in Your Portfolio Ahead of Q3 Earnings Report?
Eldorado Gold Corporation EGO is slated to report third-quarter 2024 results on Oct. 30, after market close. EGO is expected to deliver a year-over-year improvement in earnings in the quarter, aided by upbeat gold prices and production and sales volumes.
Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.
The Zacks Consensus Estimate for EGO’s third-quarter 2024 earnings has moved down 10.8% over the past 60 days to 33 cents per share. Despite the revision, the consensus mark suggests a 94% surge from the year-ago actual.
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Eldorado Gold’s Solid Earnings Surprise History
The company’s earnings outpaced the Zacks Consensus Estimates in the last four quarters. It has a trailing four-quarter earnings surprise of 430.3% on average.
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What the Zacks Model Unveils for the EGO Stock
Our proven model does not conclusively predict an earnings beat for Eldorado Gold this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that is not the case here.
Earnings ESP: EGO has an Earnings ESP of 0.00%. You can uncover the best stocks before they are reported with our Earnings ESP Filter.
Zacks Rank: The company currently carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Factors Likely to Have Shaped Eldorado Gold’s Q3 Performance
In the first half of 2024, EGO produced 239,430 ounces of gold, marking an 8% year-over-year increase aided by increased throughput at Lamaque and higher grades at Kisladag. The company’s 2024 guidance is pegged at 505,000-555,000 ounces. To fulfill this target, Eldorado Gold has to produce 265,570-315,570 ounces of gold in the second half of 2024, indicating year-over-year growth of 1-19%.
Production at Kisladag for 2024 is projected at 180,000-195,000 ounces. This suggests a production of 103,487-118,487 ounces for the second half of 2024. The mid-point of the range implies year-over-year growth of 33%, which the mine is likely to achieve, aided by higher stacking rates.
For Lamaque, the company expects 2024 production between 175,000 and 190,000 ounces. To meet this, it has to produce 85,310-100,310 ounces of gold in the second half of 2024, suggesting a decline from the 100,440 ounces produced in the prior-year period.
Efemcukuru’s production guidance for 2024 is at 75,000-80,000 ounces. This suggests production of 34,102-44,102 ounces for the second half of 2024. The mid-point suggests a 10% fall from the second half of 2023, reflecting lower throughput, partially offset by a slightly higher grade.
For 2024, the production guidance at Olympias is 75,000-85,000 ounces of gold. This translates production to 42,671-52,671 ounces for the second half of 2024. The suggested range indicates a 30% year-over-year increase at the mid-point.
Based on the above analysis, we expect upbeat production and sales numbers for Eldorado Gold in the third quarter, driven by Kisladag and Olympias, somewhat offset by lower year-over-year output at Lamaque and Efemcukuru. In the second quarter, production at Olympias was negatively impacted by labor-initiated work stoppages totaling 17 days. Eldorado has been negotiating a collective bargaining agreement and no interruptions were reported for the third quarter.
Gold prices averaged $2,491 per ounce in the third quarter, up 29% from the prior-year level. Throughout the quarter, gold prices have been fueled by increasing expectations of interest rate cuts and rising tensions in the Middle East. The Fed’s announcement of a 50-basis-point rate cut at the Sept. 17 to Sept. 18 meeting lifted gold prices, which ended the quarter at above 2,600 per ounce.
Meanwhile, higher gold prices will elevate royalty expenses in Greece and Türkiye as the royalty structures are calculated on a sliding scale linked to the gold price. This, combined with increased contractor and labor costs, and fuel prices, is anticipated to have led to higher production costs for Eldorado Gold in the third quarter of 2024. EGO’s continued focus on operational efficiencies and productivity is likely to have offset the impacts.
EGO’s Price Performance & Valuation
EGO shares have gained 59.7% in the past year, outpacing the Zacks Mining - Gold industry’s growth of 45.1%. In comparison, the Zacks Basic Materials sector and the S&P 500 have rallied 14.6% and 39.4%, respectively, in the same period.
EGO’s Price Performance Against Industry & Broader Market
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The Canadian mid-tier gold and base metals producer has performed better than major gold miners like Barrick Gold GOLD and Newmont NEM, which have gained 25.2% and 21.8%, respectively.
Eldorado Gold is currently trading at a forward price/sales ratio of 2.51 compared with the industry's 2.99.
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EGO appears cheaper than peer Alamos Gold AGI, which is trading at a forward price/sales ratio of 5.85.
Investment Thesis on EGO
EGO’s long-term demand prospects are supported by its long-life, high-quality asset portfolio and presence in solid mining jurisdictions. The company’s financial position helps it invest in growth projects. Eldorado Gold is set to take its annual gold production to 675,000-735,000 ounces in 2027, suggesting 45% growth from 2023. Copper production is expected to start in 2025 and reach 70 million pounds by 2027. Gold demand remains robust, driven by safe-haven investment, central bank purchases, and increasing use in sectors like energy and healthcare. Copper demand is expected to grow, driven by electric vehicles, and renewable energy and infrastructure investments.
Should You Buy EGO Stock Now?
While an earnings beat may be uncertain in the quarter under review, EGO is poised to deliver solid results, supported by the uptrend in gold prices and anticipated production growth. Given its attractive valuation, investing in the EGO stock ahead of its earnings announcement offers a promising opportunity. Its solid financial health and growth trajectory, supported by investments, make it a top stock for investors seeking exposure to gold and base metals.
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