Barrick Gold Earnings Preview: First Quarter 2009

Barrick Gold [[ABX]] is scheduled to report their first quarter 2009 results before the market opens on Tuesday, April 29. Based on our analysis, we at are expecting ABX to report better than expected results that exceed Wall Street’s consensus expectations.


Analyst Expectations

We are forecasting revenues of $1.71 billion and EPS of $.35. This would represent a 13% decrease in revenues from last year’s $1.96 billion in the same period. The current analyst consensus estimates calls for revenues of $1.76 billion and $.34 EPS.


Higher gold prices and cost structure improvements could lead to a modest quarterly earnings beat for Barrick Gold. Gold prices averaged $908 per ounce in the first quarter 2009, a 14% increase from the $795 average in the fourth quarter. While gold prices have retreated in April, our view is that gold prices are likely to appreciate over the next 12-18 months which should provide a positive lift to Barrick.


Share Performance

Since the beginning of the year, Barrick Gold’s shares are down almost 23%. However, in 2008 P&G’s shares fell only 13% as they easily outperformed the 34% decline in the Dow Jones index.



Shares are now trading at 16x consensus 2010 EPS estimates. This is below the relative valuations of their peer group. Barrick’s share price is highly correlated to the price of gold. We don’t expect gold prices to increase significantly, but we are anticipating an upward movement in gold prices over the next 12-18 months which should benefit Barrick’s stock.


Recommendation: Buy with a $35 price target.


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