Wheaton Precious Metals stock (NYSE: WPM) is poised to report its Q1 2023 results on Friday, May 5, reporting on a quarter that saw a rise in precious metals prices although overall production is likely to have seen declines. We estimate that the company’s revenue will come in at about $235 million for the quarter, marking a decline of about 23% versus last year, although this would be slightly ahead of consensus estimates. We project that earnings will come in at about $0.25 per share, roughly in line with the consensus estimates. So what are some of the trends that are likely to drive the company’s earnings?
WPM’s volumes of precious metals over Q4 2022 fell by about 20% year-over-year, due to lower production from the Salobo and Penasquito mines, which are two of the company’s largest, and also due to the closure of the Stratoni and 777 mines and the termination of the Keno Hill and Yauliyacu streams. This trend is likely to continue over Q1 as well. That said, prices for precious metals such as gold, which accounts for a bulk of the company’s revenue, have been firming up, driven by easing inflation and slower interest rate hikes by the Federal Reserve. Gold prices rose from around $1,850 per ounce toward the end of December 2022 to almost $2,000 by the end of March. This could potentially help price realizations to an extent.
Is Wheaton stock a buy at current levels? Precious metals prices should hold up, driven by easing inflation, concerns about global economic growth, and the recent stress on the banking system. Moreover, despite near-term production declines, Wheaton’s overall production volumes are also set to pick up in the long run, with the company guiding average production of all metals (gold, silver, palladium, and cobalt) over the next five years expected to stand at roughly 810,000 gold-equivalent ounces between 2023 and 2028, due to higher anticipated production growth from Salobo, Stillwater, and other mines. This compares to just 638,113 gold-equivalent ounces of total production in 2022. That said, we think the company’s valuation is a bit rich, trading at about 40x projected 2023 earnings. We estimate Wheaton Precious Metals valuation at $43 per share, which is about 12% below the current market price. See our analysis of Wheaton Precious Metals revenue for more details on the company’s business model and key revenue streams.
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