Barrick Gold (NYSE:GOLD) is set to report earnings on May 6. Shares have been red-hot, with GOLD stock moving swiftly higher over the last few months. That’s as gold prices continue to rise as well.
If you’re bullish on gold prices, it’s hard to be bearish on Barrick Gold.
Shares hit a 52-week high on April 23, before undergoing a multi-day pullback. The stock has since jumped higher, rallying 4.7% on May 1 before climbing almost 2% in the next session. Now investors face earnings, a potential short-term volatility event.
Sizing Up GOLD Stock
The company will follow the earnings report from Newmont Mining (NYSE:NEM), which reported earnings before the open on May 5. Not surprisingly, investors are taking pause with GOLD stock after the print. That’s as Newmont missed on both earnings and revenue expectations.
While Newmont is barely down on the numbers, investors may have been expecting better results given that the price of gold has been rallying. Of course, we should mention that this was still a pretty solid quarter. Seeing the stock rally wouldn’t be a surprise in the days and weeks to come.
Newmont reported earnings of 40 cents per share, missing estimates by 2 cents. Unlike most companies that are seeing a reduction in earnings expectations, analysts’ estimates for this quarter were down just a penny per share from 90 days ago. Further, full-year estimates are on the rise. Analysts now expect profit of $2.29 per share from Newmont this year, up from $1.92 per share a few months ago.
While revenue of $2.58 billion missed expectations by $80 million, realize that figure grew by more than 43% year-over-year.
So what does this have to do with Barrick Gold? Quite a bit, actually. Aside from Barrick’s potential hostile takeover of Newmont a year ago, analysts’ expectations are similar.
Like Newmont, analysts expect roughly the same earnings results for Barrick as they did three months ago. However, full-year estimates have climbed as well. If Barrick can beat estimates as opposed to miss them, it could help fuel a further run in GOLD stock.
At the end of the day though, it’s all about gold prices.
A Closer Look at Gold
Not long ago, we looked at why investors should think twice before investing in the Direxion Junior Gold Miners Bull 3X ETF (NYSEARCA:JNUG). Because it’s a leveraged ETF focusing on junior miners, many investors may not realize the risk they are taking on by buying this ETF.
But that didn’t mean we were bearish on gold.
While I prefer cryptocurrencies to gold, there are reasons to also be bullish on the yellow metal. There is more to an investment portfolio than stocks and bonds. Diversifying in alternative assets not only spreads out one’s risk, but also opens them up to opportunities.
For gold specifically, it’s hard not to like it when the Fed is printing money like crazy. Along with the federal government, the Fed is engaging in several different stimulus plans amounting to trillions of dollars. But so are the central banks around the world.
That won’t drive up the price of gold overnight, but over the spans of weeks, months, and quarters, the trend should be higher. You see, when central banks print paper money, it drives their value down. When the dollar (or euro or yen) is less valuable, it takes more of them to buy the same thing.
That’s exactly why it doesn’t hurt to be bullish on gold right now. And if one is bullish on gold, it’s hard not to be bullish on the companies that pull it out of the ground and sell it.
Thoughts on Barrick Gold
At the end of the day, consensus expectations call for 12% revenue growth in 2020. That’s alongside estimates for ~57% earnings growth this year. For 2021, estimates call for 20% earnings growth despite revenue growth estimates of just 1%.
In essence, analysts believe the company will expand its profitability in 2020 and 2021. Further, Barrick runs a lean balance sheet. Current assets of $6.9 billion are nearly triple current liabilities of $2.4 billion. Total assets to total liabilities is even better, at $44.4 billion vs. $14.5 billion.
All that said, shares are up more than 100% from the March lows. I would love a dip into the $20 to $22.50 area for a buying opportunity. At the end of the day though, as goes gold, so goes GOLD stock.
Matthew McCall left Wall Street to actually help investors — by getting them into the world’s biggest, most revolutionary trends BEFORE anyone else. The power of being “first” gave Matt’s readers the chance to bank +2,438% in Stamps.com (STMP), +1,523% in Ulta Beauty (ULTA) and +1,044% in Tesla (TSLA), just to name a few. Click here to see what Matt has up his sleeve now. Matt does not directly own the aforementioned securities.