Barrick: 'Under-promising and over-delivering'

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Given that gold prices are north of $1,350 per ounce, most analysts expect gold producers to bring in big profits. Yet Barrick Gold Corp. continues to go above and beyond the elevated expectations, and has exceeded the Street's consensus four quarters in a row.

The latest beat came late last week when Barrick reported quarterly production of just over two million ounces, and earnings per share of $0.84 on cash operating costs of $454 per ounce. Both production and earnings came in 10 per cent higher than consensus expectations.

CIBC World Markets analyst Barry Cooper thinks there might be a reason Barrick keeps surprising the Street: the company is "on a path of under-promising and over-delivering." That, of course, isn't exactly a bad thing.

Because earnings have been so strong, Mr. Cooper likes the name. "We think the market is overlooking small changes at the firm that collectively are adding value and enhancing the attractiveness of the firm as a gold investment for a broader audience," he wrote in a note.

Much of Barrick's allure stems from what could come in the near future, Mr. Cooper noted. Barrick's average gold price came in at $1,237 per ounce in the third quarter. Today, gold prices are about $120/oz. higher, which could spell even higher profits.

Barrick has also said the coming IFRS accounting changes will actually benefit the company and could boost cash flow per share by around 10 per cent in 2011.

Looking at the stock specifically, Mr. Cooper found that Barrick is trading under 12 times annualized earnings, which he said is a low water mark and should create a strong floor for the share price.

All this potential gave Mr. Cooper reason to slap a $60 price target on the stock. But that target comes with a big "if." CIBC expects gold prices to average around $1,400 per ounce in 2011, which means bullion demand will have to stay extremely hot.