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Bear of the Day: Yamana Gold (AUY)

Zacks

Yamana Gold Inc. (AUY) has been riding higher gold prices to bigger profit. This Zacks Rank #5 (Strong Sell), however, isn't expected to see as great a 2017 as originally hoped.

Yamana produces gold, silver and copper from its six producing mines in Canada, Brazil, Chile and Argentina. Gold, however, is its primary focus.

Do Earnings Matter for Commodities Companies?

On May 3, Yamana reported its first quarter 2017 results and missed the Zacks Consensus by 3 cents. Earnings were a loss of $0.01 versus the consensus of $0.02.

It has missed four quarters in a row.

But with miners it's really about what they're getting out of the ground.

In the quarter, it saw total gold production of 257,533 ounces, silver production of 1.08 million ounces and copper production of 26.5 million pounds.

Raised Full Year Production

The good news was that it raised full year production to 940,000 ounces of gold from its original guidance of 920,000 ounces of gold.

In early 2018, it will be producing from 7 mines, instead of 6, when production starts at Cerro Moro.

Earnings Estimates on the Decline

Because there are so many moving parts with miners, including labor costs and fluctuations in the price of the commodity, the earnings estimates can be volatile.

Two estimates have been lowered for 2017 over the last 60 days. This has pushed the Zacks Consensus Estimate down to $0.07 from $0.13 just 90 days ago.

These cuts are why you see the Zacks Rank of #5 (Strong Sell).

Earnings are actually expected to rise 45% in 2017 and another 203% in 2018.

Shares Fall from 2016 Highs

It hasn't been fun to be a shareholder over the last year.



Shares are down 16.7% year-to-date.

The good news is that it is profitable, with a forward P/E of 30.

But if you're looking for a gold miner with a better Zacks Rank, you might want to consider Randgold Resources Limited (GOLD). It's a Zacks Rank #2 (Strong Buy).

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