Allied Nevada Gold Corp. (ANV) is expected to release fourth-quarter 2014 results on Feb 23.
In the last quarter, this mining company had delivered a negative earnings surprise of 18.18%. Allied Nevada has beaten the Zacks Consensus Estimate in 2 of the trailing 4 quarters while missing the same in the other 2. The four-quarter average earnings surprise thus stands at a negative of 9.90%. Let’s see how things are shaping up for this announcement.
Factors to Consider
On Jan 21, Allied Nevada revealed its preliminary production numbers for full-year 2014, which showed a year-over-year increase in gold and silver production as well as sales. This came on the back of higher mining rate, extra ore recoveries from leaching pads and higher processing capacity at the North Merrill Crowe plant. The company also announced the completion of positive prefeasibility and feasibility studies for the Hycroft mill project.
In 2014, silver production doubled year over year on higher processing capacity of the North Merrill-Crowe plant. However, production and sales numbers were lower than the estimates for 2014. Allied Nevada expects operating results, in terms of production and sales, for 2015 to be the same as that of 2014. The company is expected to throw more light on the same in its fourth-quarter earnings call.
Allied Nevada posted a big loss in the third quarter of 2014, impacted by lower metal prices and delay of a crusher in coming on stream. The company also recorded a hefty impairment charge related to write down of the value of ore on leach pads. The decrease in metal prices also caused margins to contract in the third quarter.
The company is looking forward to reduce operating costs to improve its balance sheet. Allied Nevada is also undertaking initiatives for a permanent solution to the crusher so that it can meet demands for the mill in 2015.
In the fourth quarter, Allied Nevada anticipates a rise in production ounces owing to higher grades at its mining operations. Moreover, the company expects to place between 10–11.5 million tons of ore in the quarter.
Earnings Whispers
Our proven model does not conclusively show that Allied Nevada is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here, as you will see below:
Zacks ESP: Earnings ESP for Allied Nevada is 0.00%. This is because both the Most Accurate Estimate and the Zacks Consensus Estimate currently stand at a loss of 12 cents.
Zacks Rank: Allied Nevada currently carries a Zacks Rank #3 (Hold). Though a Zacks Rank #3 increases the predictive power of ESP, the company’s ESP of 0.00% makes surprise prediction difficult.
We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks that Warrant a Look
Here are some other companies in the basic materials sector you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Daqo New Energy Corp. (DQ) has an Earnings ESP of +41.18% and a Zacks Rank #2 (Buy).
Rio Alto Mining Limited (RIOM) has an Earnings ESP of +20.00% and a Zacks Rank #3.
Century Aluminum Co. (CENX) has an Earnings ESP of +7.58% and a Zacks Rank #3.
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