Goldcorp Inc. (USA) (GG): Will This Gold Stock Disappoint Investors?

This past quarter was terrible for gold. In fact, it was the once-shiny metal’s worst quarter in almost 50 years, and its price plunged 23%. That made for a rough quarter for gold miners, including Goldcorp Inc. (USA) (NYSE:GG), which reports its latest quarterly results on July 25. Does this mean investors are in for a dull quarter?

Photo Credit: Flickr/Giorgio Monteforti

Managing expectations
Analysts aren’t expecting as much from the company, given gold’s precipitous fall. The consensus estimate is that Goldcorp Inc. (USA) (NYSE:GG) will earn about $0.28 a share this quarter, down just pennies from last quarter. However, four of the 14 analysts covering the company have reduced their estimates over the past month, indicating that the company might miss estimates. But analysts’ estimates hardly mean much for Goldcorp Inc. (USA) (NYSE:GG), which has missed estimates by a double-digit percentage in three of the past four quarters.

What we do know is that Goldcorp Inc. (USA) (NYSE:GG) can still profit even as gold prices plunge. The company has noted that its all-in sustaining cash cost for gold is $1,135 per ounce, which is well above gold’s low in the quarter of around $1,200 an ounce. So, while it’s quite possible the company will miss analysts’ expectations this quarter, it’s not the most important area for investors to watch.

A glittering future?
Instead, the most important area for investors to watch is the company’s outlook. Last quarter the company reaffirmed guidance for the full year, but that was before the price of gold plunged. It will be interesting to note what the company’s management team sees given what’s happened. While it can’t control the price of gold, it can control its costs and growth. With a large stable of growth projects in the works, it will be important to watch if the plunge in the price of gold is changing the company’s plans.

Goldcorp Inc. (USA) (NYSE:GG) has a plan to boost its production 70% by 2017. Among its more recent projects is Pueblo Viejo, a joint venture with Barrick Gold Corporation (USA) (NYSE:ABX). The mine produced just 47,400 ounces of gold last year, but is expected to produce between 330,000 and 435,000 ounces of gold this year. Bringing that project fully on line will be an important earnings driver for both companies.