Kinross Gold Corporation’s KGC shares have popped 65.3% year to date, outperforming the Zacks Mining – Gold industry’s gain of 19.9%. The bullishness appears to have been catalyzed by its better-than-expected earnings performance on the back of a rally in gold prices.
KGC is currently trading at a roughly 7.6% discount to its 52-week high of $10.82, reached on Oct. 24, 2024, thanks to a surge in gold prices to new highs on U.S. election uncertainties and heightened geopolitical tensions.
Technical indicators show that KGC has been incessantly trading above the 200-day simple moving average (SMA) since March 6, 2024. The stock is also currently trading above its 50-day SMA. The 50-day SMA continues to read higher than the 200-day SMA, indicating a bullish trend.
Kinross Trades Above 50-Day SMA
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Is the time right to buy KGC’s shares for potential upside? Let’s take a look at the stock’s fundamentals.
Key Development Projects to Incite KGC’s Growth
Kinross has a strong production profile and boasts a promising pipeline of exploration and development projects. It remains on track with its key development projects and exploration programs, including Great Bear in Ontario and Round Mountain Phase X in Nevada. These projects are expected to boost production and cash flow and deliver significant value. KGC also completed the commissioning of its Manh Choh project and commenced production during the third quarter of 2024, leading to a substantial increase in cash flow at the Fort Knox operation.
Tasiast and Paracatu, the company’s two biggest assets, remain the key contributors to cash flow generation and production. Tasiast remains the lowest-cost asset within its portfolio with consistently strong performance while Paracatu continues to deliver steady production. KGC remains on course to meet its 2024 gold production target of 2.1 million gold equivalent ounces.
Kinross’ Solid Financial Health Bodes Well
KGC has a strong liquidity position and generates substantial cash flows, which allows it to finance its development projects, pay down debt and drive shareholder value. The company ended the third quarter with solid liquidity of roughly $2.1 billion. KGC also generated record third-quarter attributable free cash flows of $414.6 million, driven by the strength in gold prices and strong growth in operating margins. It remains focused on paying down debt, reducing its net debt by approximately $1 billion over the past 18 months. KGC repaid $350 million of debt in the third quarter.
Rallying gold prices should boost KGC’s profitability and drive cash flow generation. Gold has been among the best-performing assets this year. Gold prices have rallied roughly 27% this year, driven by strong demand from central banks, a dovish Fed interest rate outlook, global uncertainties and a surge in safe-haven demand thanks to increased tensions in the Middle East. After the pullback due to a rally in the U.S. dollar following Trump's win in the U.S. Presidential election, gold prices regained strength as the Federal Reserve cut interest rates by a quarter point. While a stronger U.S. dollar weighed on the yellow metal recently, gold prices are regaining strength on heightened uncertainty over the Russia-Ukraine conflict. Prices are also likely to gain support on prospects of another rate cut in December.
Further, KGC offers a dividend yield of 1.2% at the current stock price. It has a payout ratio of 20% (a ratio below 60% is a good indicator that the dividend will be sustainable). Backed by strong cash flows and sound financial health, the company's dividend is perceived to be safe and reliable.
KGC’s Earnings Estimates Moving Higher
Earnings estimates for KGC have been rising over the past 60 days, reflecting analysts’ optimism. The Zacks Consensus Estimate for 2024 and 2025 has been revised upward over the same time frame.
The Zacks Consensus Estimate for 2024 earnings is currently pegged at 69 cents, suggesting year-over-year growth of 56.8%. Earnings are also expected to register roughly 28.9% growth in 2025. KGC has a long-term EPS growth rate of 29.7% versus 23.5% for its industry.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
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Kinross’ Valuation Looks Attractive
KGC’s attractive valuation should beckon investors seeking value. The stock is currently trading at a forward P/E of 11.58X, representing a roughly 6.5% discount when stacked up with the industry average of 12.39X.
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KGC Stock Outperforms Industry & S&P 500
KGC’s shares have performed impressively on the bourses thanks to the rally in gold prices and solid earnings performance. Its shares have rallied 88% over a year, topping the industry’s 31.1% rise and the S&P 500’s increase of 29.8%. It has also outperformed its gold mining peers, with Barrick Gold Corporation GOLD, Newmont Corporation NEM and Agnico Eagle Mines Limited AEM gaining 12.2%, 18% and 69.7%, respectively, over the same period.
KGC’s One-year Price Performance
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Final Thoughts: Buy KGC Shares
With a strong pipeline of development projects and solid financial health, KGC presents a compelling investment case for those seeking exposure to the gold mining space. Rising earnings estimates and a healthy growth trajectory are the other positives. A favorable gold pricing environment also augurs well. We recommend investors accumulate this Zacks Rank #2 (Buy) stock as it has upbeat growth prospects.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
