We are maintaining our Neutral recommendation on
). Third-quarter 2012 adjusted earnings (excluding one-time
losses and gains other than stock-based compensation expense) of
54 cents per share exceeded the Zacks Consensus Estimate of 45
Revenues jumped roughly 18% year over year to $1.54 billion on
higher gold sales and beat the Zacks Consensus Estimate. Improved
operating performance across the Red Lake and Penasquito mines
contributed to the growth. The company backed its guidance for
Goldcorp is an unhedged producer of gold and as such, it is well
positioned to gain from increase in gold prices. It enjoys a
leading position in the industry and aims to attain 70%
production growth by 2016. Moreover, Goldcorp is one of the
lowest-cost gold producers and has a strong balance sheet.
Goldcorp has been working hard to meet its long-term growth
target through a number of acquisitions. The Cerro Negro and El
Morro acquisitions helped it to establish two more important
operating bases in South America, providing further impetus to
its already substantial growth pipeline. Moreover, the addition
of the Camino Rojo deposit near Penasquito will further add to
Goldcorp's growth profile at a lower cost.
Goldcorp also has a number of projects at hand, which are
expected to help it to achieve its long-term growth objectives.
The company, in August 2012, registered its first gold production
at the Pueblo Viejo mine in the Dominican Republic.
The company holds a 40% interest in the Pueblo Viejo mine
Barrick Gold Corporation
) holds the remaining stake. Pueblo Viejo is expected to
contribute around 53,000 ounces of gold to Goldcorp's production
BARRICK GOLD CP (ABX): Free Stock Analysis
GOLDCORP INC (GG): Free Stock Analysis Report
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However, Goldcorp faces geopolitical risks along with risks
arising out of volatility in prices of metals. Moreover, it is
exposed to cost pressures as well as certain short-term
challenges across its Red Lake and Penasquito mines.
At Red Lake, Goldcorp's production remains affected by operating
delays in the High Grade Zone due to increased seismic activity.
On the other hand, the Penasquito mine continues to face water
supply issues. Moreover, the company saw lower production at the
Porcupine mine in Ontario in the third quarter due to lower
The company's aggressive acquisition policy can also be an area
of concern as integrating new mines and businesses might not be
completely seamless. Also, Goldcorp's ability to maintain or
increase its production depends on its ability to bring new mines
into production while expanding reserves at current mines.
Our recommendation on Goldcorp is in agreement with a short-term
Zacks #3 Rank (Hold).