Eldorado Gold Trades Near 52-Week High: How Should You Play the Stock?
Eldorado Gold Corporation EGO shares closed at $18.50 yesterday, just 2% shy of its 52-week high of $18.85 reached on Sept. 26. EGO shares have gained 80.7% in the past year, outpacing the Zacks Mining - Gold industry’s growth of 48.9%. In comparison, the Zacks Basic Materials sector and the S&P 500 have rallied 19.7% and 38.5%, respectively, in the same period.EGO Outperforms Industry, Sector & S&P 500 Image Source: Zacks Investment Research The Canadian mid-tier gold and base metals producer has performed better than major gold miners like Barrick Gold GOLD and Newmont NEM, which have gained 26.3% and 49.9%, respectively.Eldorado Gold’s shares have benefitted from a strong production performance and solid financial results delivered in the first half of 2024. The stock has also been supported by the rally in gold prices and its upbeat production outlook for 2024.EGO Shares Trade Above 50-Day & 200-Day SMA Image Source: Zacks Investment Research The EGO stock is trading above its 50-day and 200-day moving averages, indicating solid upward momentum and price stability. This reflects a positive market sentiment and confidence in the company's financial health and long-term prospects.Factors Favoring Eldorado GoldEGO Delivers Upbeat Results in 1H24Eldorado Gold posted strong results in the first half of 2024, with revenues rising 22% year over year to $555 million, benefitting from higher average realized prices and increased volumes sold. Adjusted earnings per share surged 329% year over year to 60 cents in the first half of 2024. EGO produced 239,430 ounces of gold in the first half of 2024, 8% higher than the prior-year period. This performance was driven by increased throughput at Lamaque and higher grades at Kisladag.Higher Output & Prices to Aid EGO 2024 Results, Costs to AilEGO expects gold production to increase in the second half of the year and be 505,000-555,000 ounces for 2024. The mid-point of the range suggests a 9% improvement from the 2023 levels. Gold prices have gained 31.6% year to date, providing a favorable backdrop for the company. Gold prices are currently around $2,730 per ounce, gaining on safe-haven demand amid uncertainty surrounding the U.S. election and rising tensions in the Middle East. Interest rate cuts from major central banks have also boosted prices.Meanwhile, higher gold prices will elevate royalty expenses in Greece and Türkiye as the royalty structures are calculated on a sliding scale linked to the gold price. This, combined with increased contractor and labor costs, and fuel prices, is anticipated to hike production costs in 2024. Total cash costs for 2024 are expected to be $840-$940 per ounce sold and average all-in sustaining costs (AISC) are pegged at $1,190-$1,290 per ounce sold. The mid-point of the range for total cash cost suggests a year-over-year rise of 5% and the same for AISC indicates growth of 2%. While higher production levels and elevated gold prices will likely boost EGO’s top-line results in 2024, elevated costs will hurt earnings.Rising Estimates Instill Confidence in EGO EarningsThe Zacks Consensus Estimate for Eldorado Gold’s earnings for 2024 and 2025 have moved up over the past 60 days. Image Source: Zacks Investment Research The consensus mark for 2024 earnings is pegged at $1.41, suggesting a year-over-year surge of 147.4%. The estimate for 2025 of $1.43 indicates an increase of 1.3%. Image Source: Zacks Investment Research Eldorado Gold’s earnings beat the Zacks Consensus Estimates in the trailing four quarters, the average surprise being 430.3%. Image Source: Zacks Investment Research Find the latest earnings estimates and surprises on Zacks Earnings Calendar.EGO’s Prospects Ride on Diversified Portfolio, Strong DemandEldorado operates four mines — Kisladag and Efemcukuru in Turkiye, the Lamaque Complex in Canada, and Olympias in Greece. Kisladag, Efemcukuru and Lamaque are gold mines, whereas Olympias is a polymetallic operation producing three concentrates bearing gold, lead-silver and zinc.EGO is also advancing its copper-gold development project, Skouries, in Greece. Its development projects include Perama Hill, a wholly-owned gold-silver project in Greece, and Certej, an 80.5% owned gold project in Romania.Gold's demand remains robust, driven by safe-haven investment, central bank purchases, and increasing use in sectors like energy and healthcare. Silver’s unique properties make it important in various industrial applications, electronics, solar panels, nuclear energy, construction, medical treatments and devices, and even textiles. Zinc is one of the top mined and most widely used metals, and it is used to protect iron and steel against rusting, store energy in zinc-ion batteries and produce rubber, plastic, paints and electrical equipment. Lead is used in automotive applications, telecommunications, batteries, medical imaging and marine applications, among others. Copper demand is expected to grow, driven by electric vehicles, and renewable energy and infrastructure investments. Per the International Copper Association, annual refined copper demand is expected to double by 2050 from the 2020 levels.Eldorado Gold’s Solid Financial Position to Support GrowthAs of June 30, 2024, Eldorado Gold had significant liquidity, including $595 million in cash and $215 million in available credit. The company’s total debt to total capital was 0.17 as of June 30, 2024, lower than the industry’s 0.29. This will support its ongoing investments in growth.EGO Has a Solid Pipeline of Growth ProjectsSkouries is a high-grade gold-copper porphyry deposit and is expected to be a key driver of Eldorado’s growth story. The project was 76% complete as of the second-quarter 2024 end. It remains on track for its first production in the third quarter of 2025. The project is expected to produce 50,000-60,000 ounces of gold and 15-20 million pounds of copper in 2025.On completion, the project is expected to produce an average of 140,000 ounces of gold and 67 million pounds of copper annually over its 20-year mine life.The company is focused on increasing productivity at the Lamaque Complex by ramping up development and mucking rates in the Triangle and Ormaque deposits in the second half of 2024. The company is expected to announce the inaugural reserves for the Ormaque deposit by the end of this year. The Lamaque project has a large resource base and exploration upside from nearby targets.Kisladag is a low-grade, bulk-tonnage, open-pit operation that uses heap leaching for gold recovery. EGO has completed commissioning the fine-ore agglomeration circuit and upgraded materials handling systems. Kisladag has the scope to increase throughput and recoveries beyond the planned 56%.EGO Expects Significant Growth in Production by 2027Annual gold production is expected to increase to 675,000-735,000 ounces in 2027. The mid-point of the range suggests 45% growth from 485,139 ounces of gold produced in 2023. Copper production is expected to start in 2025 and reach 70 million pounds by 2027. Image Source: Eldorado Gold EGO Stock’s Valuation Remains AttractiveEldorado Gold is currently trading at a forward price/sales ratio of 2.70 compared with the industry's 3.20. Image Source: Zacks Investment Research The company appears cheaper than peer Alamos Gold AGI, which is trading at a forward price/sales ratio of 5.88.Risks to Consider Before Choosing Eldorado GoldIn the second quarter of 2024, production at Olympias was negatively impacted by labor-initiated work stoppages totaling 17 days. Per the last available update, Eldorado Gold is engaged in negotiating a new collective bargaining agreement with the union. If this does not materialize, it might affect the company’s guidance.Our Final Take on EGO StockDespite some near-term risks related to costs and labor issues, rising earnings estimates and the upward trajectory in gold prices bode well for Eldorado Gold. The company’s diversified portfolio, presence in solid mining jurisdictions and growth projects position it well. With EGO’s gold production expected to grow 45% by 2027 (from 2023) and copper production set to begin in 2025, holding the stock seems prudent for investors seeking exposure to gold and base metals. EGO currently has a Zacks Rank #3 (Hold) and a VGM Score of B. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Infrastructure Stock Boom to Sweep AmericaA massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made.The only question is “Will you get into the right stocks early when their growth potential is greatest?”Zacks has released a Special Report to help you do just that, and today it’s free. Discover 5 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale.Download FREE: How To Profit From Trillions On Spending For Infrastructure >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Newmont Corporation (NEM): Free Stock Analysis Report Barrick Gold Corporation (GOLD): Free Stock Analysis Report Alamos Gold Inc. (AGI): Free Stock Analysis Report Eldorado Gold Corporation (EGO): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks
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