Silver Wheaton’s Q1 2017 Earnings Review: Favorable Pricing Environment Drives Earnings Growth

SLW: Wheaton Precious Metals logo
SLW
Wheaton Precious Metals

Silver Wheaton reported its Q1 2017 earnings result on May 9 and conducted a conference call with analysts the next day. [1] The company reported a considerable improvement in its Q1 earnings, driven by favorable precious metal prices. Higher silver and gold prices offset the impact of a decline in overall shipments on earnings. The company’s silver shipments declined on a year-over-year basis as a result of a strike at the San Dimas mine and lower production at the Antamina mine due to the mining of lower grade ores and lower throughput.

SLW Q1 2017 Earnings Review

Precious metal prices rose considerably in Q3 2016 in the wake of the unexpected outcome of the UK’s June 23 EU referendum. The uncertainty caused by the outcome of the referendum drove a surge in the safe-haven investment demand for precious metals, driving up the prices of gold and silver. Though precious metal prices declined over the next two quarters as the Fed hiked interest rates, they still averaged higher on a year-over-year basis in Q1 2017. However, prices rose post the March rate hike in the weeks leading up to the first round of the French Presidential election, held on April 23. Strengthening popular support for Marine Le Pen, who favored a withdrawal of France from the EU, drove investors towards safe havens such as precious metals. However, Emmanuel Macron’s eventual victory in the elections calmed investors’ fears, resulting in a decline in investment demand for precious metals and their prices.

Relevant Articles
  1. Capital One Stock Gained 44% In The Last 6 Months, What’s Next?
  2. Up 8% Year To Date As 5G Gains Traction, What’s Next For Verizon Stock?
  3. Up 32% In The Last 12 Months, Where Is BNY Mellon Stock Headed?
  4. Rallying 30% YTD, What’s Spurring The Rally In Applied Materials’ Stock?
  5. Will UPS Stock Recover To Its Pre-Inflation Shock High of $230?
  6. Should You Pick Boeing Stock At $190?

Gold Prices 2017

Gold Prices in 2017, Source: Kitco

Going forward, gold and silver prices are expected to remain subdued as the Federal Reserve raises interest rates. Steady economic growth and strong jobs growth is expected to result into an additional 50 basis points increase in benchmark rates over the rest of the year. [2] Thus, though Silver Wheaton benefited from a favorable pricing environment in Q1, it is unlikely to do so in the coming quarters. In addition, there have been no material developments in the company’s long running tax dispute with the Canadian Revenue Agency (CRA). [1] The dispute with the CRA raises concerns over whether Silver Wheaton can sustain its business model, which subjects the majority of its operations to the tax jurisdictions of tax havens, in the long run. The unresolved dispute with the CRA remains a source of uncertainty surrounding the company’s stock.

Have more questions about Silver Wheaton? See the links below.

Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Silver Wheaton

See More at Trefis | View Interactive Institutional Research (Powered by Trefis)

Get Trefis Technology

 

Notes:
  1. Silver Wheaton’s Q1 2017 Earnings Call Transcript, Seeking Alpha [] []
  2. The Fed’s New Dot Plot, Bloomberg []