Next Tuesday, Pan American Silver Corp. (USA) (NASDAQ:PAAS) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they’ll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you’ll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.
Gold got all the headlines last month with its $140 single-day plunge, but silver prices have also been on the decline, hurting Pan American Silver Corp. (USA) (NASDAQ:PAAS) and other miners. With the company facing other challenges as well, how can it handle the inevitable margin squeeze that will result if silver doesn’t rebound quickly? Let’s take an early look at what’s been happening with Pan American Silver Corp. (USA) (NASDAQ:PAAS) over the past quarter and what we’re likely to see in its quarterly report.
Stats on Pan American Silver
|Analyst EPS Estimate||$0.25|
|Change From Year-Ago EPS||(57%)|
|Revenue Estimate||$257.03 million|
|Change From Year-Ago Revenue||12.3%|
|Earnings Beats in Past 4 Quarters||1|
Will Pan American Silver’s earnings be tarnished this quarter?
Analysts have severely cut their view on Pan American Silver Corp. (USA) (NASDAQ:PAAS)’s earnings prospects. For the first quarter, they’ve chopped $0.18 per share from their estimates from three months ago, while they’ve shaved about a third from their full-year 2013 and 2014 earnings figures. The stock has responded similarly, falling nearly 30% since early February.
Falling silver prices have been painful for Pan American and its peers ever since the white metal hit its peak price near $50 in 2011. With its silver production dwarfing that of competitors Hecla Mining Company (NYSE:HL) and First Majestic Silver Corp (NYSE:AG) , especially in light of the long closure of Hecla Mining Company (NYSE:HL)’s Lucky Friday mine that just recently came back on line, Pan American Silver Corp. (USA) (NASDAQ:PAAS) has huge exposure to changing silver prices.
Yet another important component of Pan American Silver Corp. (USA) (NASDAQ:PAAS)’s woes comes from the cost side of the equation. First Majestic has done an excellent job of maximizing its profit margins, keeping its costs down despite pressures throughout the industry from labor and capital expenditures. Pan American has managed to stay ahead of archrival Coeur d’Alene Mines Corporation (NYSE:CDE) on the cost curve, but moves like its recent $100 million impairment charge on its Navidad mine in Argentina threaten Pan American’s track record of operational efficiency.