Silver Wheaton Earnings: What We’re Watching

Silver Wheaton (NYSE:SLW), the world’s largest silver streaming company, will release its fourth quarter and annual earnings on Thursday, March 22. Among other items to watch, we will look for the average price of silver realized by the company in a rather volatile year. Silver prices have been extremely volatile in the past year, ranging from a high of about $49 per ounce in April, to a low of $26 per ounce in December. SLW competes with silver miners like Silver Standard Resources (NASDAQ:SSRI), Pan American Silver (NASDAQ:PAAS), Bear Creek Mining Corporation (CVE:BCM) and Endeavor Silver (NYSE:EXK).

We have a $43 price estimate for Silver Wheaton’s stock, which is roughly 30% premium to the current market price.

See our full analysis for Silver Wheaton

Realized price to take a hit

Silver Wheaton procures silver from mining companies at a fixed price in lieu of an upfront investment in that company’s project. Silver Wheaton’s profitability depends highly on the amount of silver it sells and the price it sells it on. The company will definitely see a dip in the average realized price of silver sold by the company in the fourth quarter, but the high margin that the company commands will still help it post a robust profit. We expect the company to post an average selling price close to $30 in the Q4 2011, and we may see higher shipments by Silver Wheaton as the the dip in the silver price might have triggered the physical demand for the precious metal.

In this Q3 2011, the realized selling cost jumped to over $36 from $19.50 in Q3 2010. In the last quarter, the average cost that the company had to bear was just above $4 per ounce of silver. As a result, the company’s net earnings increased by 570 percent on a year-on-year basis. ^[1]

Understand How a Company’s Products Impact its Stock Price at Trefis

1. Silver Wheaton Revenues and Operating Cash Flows Double in the Third Quarter, Company Press Release, Nov 2011 [↩]