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Franco-Nevada: Another Strong Year Across The Board

Mar. 10, 2020 8:50 PM ETFranco-Nevada Corporation (FNV), FNV:CA13 Comments
Taylor Dart profile picture
Taylor Dart


  • Franco-Nevada reported earnings yesterday, beating both top-line and bottom-line estimates, with a record year across the board.
  • The company reported revenue of $258.1 million in Q4, up 74% year over year, and more than twice the revenue growth rate of the industry average.
  • Based on the company's continued operational excellence and 20% earnings growth expected in FY-20, I continue to see the stock as a Hold, and believe recent correction is noise.

We're now more than 90% through the Q4 earnings season for the gold miners (GDX), with significantly improved performance from a rather sluggish Q3. Thus far, more than 60% of companies have managed to beat earnings estimates, and we've seen companies beating sales estimates jump to nearly 50%. Franco-Nevada (NYSE:FNV) is the most recent miner to report its earnings, and the company has beaten on both the top line and bottom line yet again, trouncing estimates, and putting up 57% annual earnings per share (EPS) growth for the year. The company's revenue growth rate is tracking well above the industry average of 27.71%, and FY-2020 earnings estimated are projecting another double-digit year for annual EPS growth. Based on the company's continued position as a leader in the sector, I continue to remain long the stock and see Franco-Nevada as a Hold.

(Source: Author's Table & Data)

Franco-Nevada is the most recent miner to report earnings, and the stock has crushed estimates for the second quarter in a row. The company reported record quarterly revenue of $258.1 million in Q4 2019, and $844.1 million in revenue for the year. The company's record sales of gold-equivalent ounces (GEOs) contributed to this strong year, as the company sold 516,438 GEOs for the year, and over 153,396 in Q4 alone. The company has guided for further growth to 565,000 GEOs in FY-2020, an increase of nearly 10% year over year. If the company can meet these estimates, I believe that the current earnings estimates for $2.22 in FY-2020 will be on the conservative side, and I believe we could see $2.27 or higher in EPS for FY-2020. Let's dig into the results a little closer below:

(Source: Mining-Technology.com)

One of the most significant contributors to Franco-Nevada's growth going forward is First Quantum's (OTCPK:FQVLF

This article was written by

Taylor Dart profile picture
"A bull market is when you check your stocks every day to see how much they went up. A bear market is when you don't bother to look anymore."- John Hammerslough You can access more in-depth research, my current portfolios, new positions I am entering/exiting, and proprietary sentiment indicators for gold miners in my newsletter below.  Returns Link: https://imgur.com/a/6fcWjD6Subscription Link: https://buy.stripe.com/3cseV37nl9Y7dUcaEI - Disclosure: I am not a financial advisor. All articles are my opinion - they are not suggestions to buy or sell any securities. Perform your own due diligence and consult a financial professional before trading or investing.

Analyst’s Disclosure: I am/we are long GLD, FNV. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Disclaimer: Taylor Dart is not a Registered Investment Advisor or Financial Planner. This writing is for informational purposes only. It does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Taylor Dart expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (13)

MyFairShare profile picture
Thank you Taylor, for your detailed analysis of FNV. Only sold 1/3 so far. Appreciate your accurate numbers and wide-ranging overview of the earnings history and growth potential during the current market conditions: "The other rare distinction that Franco-Nevada has from its peers is the company's consistent double-digit annual EPS growth rate, which makes the stock not only a solid gold company but also a growth stock."
Thank you for the informative article! You answered my only concern - the oil portion of their earnings has been holding me back from buying FNV. I have done well in the past of this stock but sold above 110. My first tranche will be in the low 90's …. assuming it pulls back that far.
lorddarley profile picture
Aren't you a bit uncomfortable with their 15% exposure to energy?
Taylor Dart profile picture
Hi Lorddarley,

Not particularly, no. FY-2020 guidance for energy is $87 M at the mid-point, into likely $960 - $980 M in revenue thanks to the boost to metals prices - I'd say it's less than 10%.

Lots of wells drilled by companies were completed in 2019, so 2020 revenues for FNV will not be affected much, it's more looking ahead to 2021 revenue from oil/gas assuming we stay sub $35 oil for the next several months. If energy/gold mix was 50/50, then it would be a different story. However, a 25% drop in oil prices to squeeze margins on 10% of business is more than offset by a 10% rise in gold prices the past 3 months on 90% of business.

The company made it through 2016 fine with $25~ oil briefly, albeit with slightly smaller exposure, so I don't think this is a deal-breaker for the company at all. It'll be a minor drag on 2021 revenues if oil stays below $40 for the next 9 months, but that's about it.
Long NEM & FNV...thanks for the great article Taylor.
Taylor Dart profile picture

Thank you & thanks for reading. Two solid picks there.


c0lbski profile picture
I enjoy your articles. You praised sandstorm and I am happy you did. Keep up the great work.
Taylor Dart profile picture
Hi Colbski,

Thank you & thanks for the kind words - so flattered to hear you've found them of value.

hi taylor great to connect with you again
your article is positive and business as usual in the gold miners
are u ;not concerned about the beating the miners had in recent days?
Taylor Dart profile picture
Hi Nameer,

Nice to hear from you, and thank you. It depends on which ones one is long. I think the sector is made up of leaders and laggards, and it's all about managing risk, and knowing when to press bets.

I have small bets in the best names, but there's certainly more than half of the sector that I wouldn't touch as they can't get their act together, even with a higher gold price and those companies aren't worth owning.
thank you taylor always a pleasure
Nice article again, Taylor. Do you also like AEM & PAAS at these
"beaten-down levels" (my view)?
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