On Nov 11, 2014, Zacks Investment Research downgraded mining company Agnico Eagle (AEM), to a Zacks Rank #5 (Strong Sell).
Why the Downgrade?
Agnico Eagle released its third-quarter 2014 results on Oct 29. The company logged a net loss of $15.1 million (or 7 cents per share) on a reported basis in the third quarter, compared with a net income of $74.9 million (or 43 cents a share) recorded in the year-ago quarter. The bottom line was affected significantly by lower-realized gold prices and higher expenses related to amortization and exploration projects.
Even though the company’s revenues were up 4.3% year over year to $463.4 million in the quarter it missed the Zacks Consensus Estimate of $467 million.
The Zacks Consensus Estimate for the fourth quarter of 2014 has fallen over the last 30 days by 31.3% to 11 cents per share. Estimates have also fallen for 2014 and 2015 by 14.6% and 26%, respectively, over the same period. The current Zacks Consensus Estimate for 2014 and 2015 stand at $1.05 and 97 cents per share, respectively.
Agnico Eagle remains exposed to a weak gold price environment, which may continue to hurt its bottom line. Moreover, any potential delay associated with the development projects may jeopardize its future production.
Although Agnico Eagle is making a good progress with its cost containment measures, it is still seeing high costs across a number of mines.
Other Stocks to Consider
Some other stocks in the broader basic materials sector that warrant a look includes Lake Shore Gold Inc. (LSG), Mag Silver Corp. (MVG) and Valhi, Inc. (VHI). All of them carry a Zacks Rank #2 (Buy).
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