Wheaton Precious Metals stock (NYSE: WPM) is poised to report its Q2 2023 results on Friday, August 11, reporting on a quarter that saw a marginal rise in precious metals prices although this is likely to be offset by weaker production. We estimate that the company’s revenue will come in at about $250 million for the quarter, marking a decline of about 19% versus last year, although this would be slightly ahead of consensus estimates. We project that earnings will come in at about $0.27 per share, also slightly ahead of 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 Q1 2023 fell by about 14% year-over-year, due to the disposal of the Yauliyacu precious metals purchase agreement in the prior quarter and due to the closure of the 777 mine and the termination of the Yauliyacu and Keno Hill PMPAs coupled with lower production from Penasquito and Antamina. This trend is likely to continue over Q2 as well, with overall volumes likely to fall. That said, prices for precious metals such as gold, which accounts for a bulk of the company’s revenue, have been ruling at near all-time highs in recent months, driven by easing inflation and slower interest rate hikes by the Federal Reserve. Gold prices over the quarter were at roughly $1,950 to $2,000 per ounce. 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 U.S. 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 38x projected 2023 earnings. We estimate Wheaton Precious Metals valuation at $42 per share, slightly 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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