Wheaton Precious Metals’ Q4 ’17 Results Present Modest 2018 Expectations Despite Beating Market Estimates

by Trefis Team
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Trefis
WPM
Wheaton Precious Metals
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Wheaton Precious Metals (NYSE: WPM) released its fourth quarter and full-year 2017 results on 21st March, ’18 and conducted a conference call with analysts the following day. The company reported a better than expected revenue of $242.5 million and adj-EPS of $0.19 in Q4 ’17. Better than expected revenue was a resultant impact of the company beating its production guidance for both silver and gold in 2017. However, production of both silver and gold is expected to remain subdued in the current year as per the company’s latest guidance, which has led us to revise our fair value estimate for the company to $22.36 as per our interactive valuation model.

Our revised $22.36 fair price estimate is based on a revised revenue estimate of $855 million for 2018, a P/S multiple of 11.5 and a total share count of 442 million.

Revenue of $855 million is arrived at by adding the total expected revenue from the company’s silver and gold segment. Silver sales volume in 2017 fell by 13% year-on-year (Y-o-Y) due to the operational issues experienced in the San Dimas mines coupled with the expiry of the company’s silver purchase agreement of Cozamin. Silver output in 2018 is expected to be 22.5 million ounces, ~20% lower than the 2017 production level. The silver production level is expected to be lower with the termination of the existing San Dimas silver purchase agreement which is replaced by a new purchase agreement with First Majestic relating to the San Dimas mine. With an expected price of $17.10 per ounce of silver, we expect total sales revenue from the company’s silver streaming agreement to be $387 million.

Gold output in 2018 is expected to remain stagnant at about 335,000 ounces. And with an expected gold price of $1,320 per ounce, we expect the total revenue from the company’s gold streaming operations to be $469 million. This gives us our total revenue estimate of $855 million for the company.

Thus, with our revised assumptions, we arrive at our new fair price estimate of $22.36, ~11% higher than the current market price. In case you have a different perspective, you can make changes to our assumed 2018 figures and arrive at your own price estimate for the company.

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