On today’s Breakouts report, there are six stocks on the positive breakouts list (stocks with positive price momentum), most of which are gold stocks, and 77 stocks are on the negative breakouts list (stocks with negative price momentum).
Discussed today is a gold stock that is on the positive breakouts list – Kinross Gold Corp. (K-T). Month-to-date, the share price has rallied 20 per cent, making it the second best performing stock in the S&P/TSX Composite Index.
A brief outline on Kinross is provided below that may serve as a springboard for further fundamental research when conducting your own due diligence.
The company
Toronto-based Kinross is a senior gold producer with operations in the Canada, the U.S., Brazil, Chile and Mauritania. Over 50 per cent of its production stems from two mines, Tasiast in Mauritania and Paracatu in Brazil.
In terms of its forecast 2023 geographical production breakdown, 32 per cent of total forecast production is expected from the U.S., 29 per cent from Mauritania, 28 per cent from Brazil and 11 per cent from Chile.
The stock is dual-listed, trading on the Toronto Stock Exchange under the ticker K-T and on the New York Stock Exchange under the ticker KGC-N.
Quarterly earnings and outlook
After the market closed on Aug. 2, the company reported second-quarter financial results.
Production came in at 555,036 gold equivalent ounces, up 22 per cent year-over-year, at an all-in sustaining cost (AISC) of US$1,296 an ounce. Adjusted earnings per share from continuing operations was 14 US cents, above the consensus estimate of 8 US cents per share. Adjusted operating cash flow per share came in at 37 US cents. The company generated free cash flow from continuing operations of US$247-million in the quarter. Debt repayment is one of management’s priorities. In the second quarter, the company paid down US$220-million of debt and intends to repay the remaining US$100-million drawn on its revolving credit facility in the months ahead. At quarter-end, the trailing 12-month net debt-to-EBITDA ratio stood at 1.3 times.
Management reaffirmed its 2023 outlook anticipating production will come in at around 2.1 million ounces at an AISC of US$1,320 per ounce, both within plus or minus 5 per cent.
For 2024 and 2025, annual production is expected to remain steady at around 2.1 million ounces and 2 million ounces, respectfully.
After the market closes on Nov. 8, the company will release its third-quarter financial results. The consensus adjusted earnings per share estimate is 10 cents. Management will be hosting an earnings call the following day.
Dividend policy
The company pays its shareholders a quarterly dividend of 3 US cents per share, or 12 US cents per share on a yearly basis. This equates to a current annualized yield of approximately 2.2 per cent.
Analysts’ recommendations
According to Bloomberg, there are 12 buy-equivalent recommendations and six neutral recommendations.
The firms providing research coverage on the company are: ARC Independent Research, Beacon Securities, BMO Nesbitt Burns, Canaccord Genuity, CIBC Capital Markets, Cormark Securities, Desjardins Securities, Eight Capital, ISS-EVA, Jefferies, Morningstar, National Bank Financial, Raymond James, RBC Dominion Securities, Scotiabank, Stifel Canada, TD Securities and Zacks.
Revised recommendations
Month-to-date, five analysts have revised their target prices:
- Canaccord’s Carey MacRury to $9 from $9.50.
- Desjardins’ John Sclodnick to $8.75 from $8.50.
- Jefferies’ Christopher Lafemina to US$4.65 from US$5.
- National Bank’s Mike Parkin to $10 from $9.75.
- Zacks’ analysts’ to US$5 and then $5.50 (Canadian).
Valuation
The stock is commonly valued by analysts on a price-to-net asset value basis.
According to Bloomberg, the average one-year target price is $8.79, implying the share price has 19 per cent upside potential over the next 12 months.
Insider transaction activity
Since the beginning of September, two insiders have traded shares in the public market.
On Sept. 19, executive vice-president, corporate development, external relations and chief legal officer Geoff Gold exercised his options, receiving 59,886 shares at a cost per share of $4.59, and sold 59,886 shares at a price per share of $7.07, leaving 1,175,292 shares in this particular account. Net proceeds from the sale exceeded $148,000, not including any associated transaction fees.
On Sept. 6, executive vice-president and chief operating officer Claude Schimper sold 7,000 shares at a price per share of $6.60. Proceeds from the sale totaled over $46,000, excluding trading fees.
Chart watch
Year-to-date, the share price is up 34 per cent. Much of this return is due to the recent surge in the share price. Month-to-date, the share price has rallied 20 per cent, making it the second best performing stock in the S&P/TSX Composite Index, fractionally behind Osisko Mining Inc. (OSK-T).
Given the rapid rise in the share price, the stock has entered overbought territory with a relative strength index (RSI) reading of 70. Generally, an RSI reading at or above 70 reflects an overbought condition.
In terms of key resistance and support levels, the stock faces a major ceiling of resistance around $8. After that, there is a ceiling of resistance around $10. In terms of downside support, there is strong support around $6, near its 200-day moving average (at $6.38). Failing that, there is technical support around $5.
ESG Risk Rating
According to Sustainalytics, the company has an environmental, social and governance (ESG) risk score of 26.5 as of July 13, 2023. A risk score of between 20 and 30 reflects a “medium risk” rating.
The Breakouts file is a technical analysis screen intended to identify companies that are technically breaking out. In addition, this report highlights a company’s dividend policy, analysts’ recommendations, financial forecasts, and provides a brief technical analysis for a security to provide readers with more information.
If a stock appears on the positive breakouts list, this indicates positive price momentum, and that a company may be worthwhile for investors to look at the fundamentals in order to determine if the recent price strength is warranted and will continue. If a security appears on the negative breakouts list, this indicates negative price momentum, and may be indicative of either deteriorating fundamentals or perhaps indicates a buying opportunity.
Securities screened are from the S&P/TSX composite index, the S&P/TSX Small Cap index, as well as Canadian small cap stocks outside of these indexes that have a minimum market capitalization of $200-million.
A technical analysis screen does not replace fundamental analysis, but can help identify companies worth having a closer look at.
This report should not be considered an investment recommendation.
Jennifer Dowty