Wheaton Precious Metals stock (NYSE: WPM) is set to release its Q2 2024 results on August 8, during a period where gold prices have seen substantial increases. Analysts estimate revenue to be around $312 million, a 28% year-over-year increase, slightly above consensus. Earnings are expected to be $0.31 per share, similar to last year and in line with expectations. Factors likely to drive earnings include improved production levels and rising gold prices.
Production at Wheaton was impacted in 2023 due to various factors, including a strike at the Peñasquito mine in Mexico. However, production has increased this year, with Q1 2024 seeing a 19% year-over-year rise in attributable gold equivalent production. The rise was driven by various factors such as mill throughput expansion at the Salobo mine in Brazil and increased production at Constancia in Peru. With gold prices reaching near all-time highs, Wheaton’s revenues are expected to benefit from higher price realizations.
WPM stock has shown strong gains in recent years, increasing by 40% from early 2021 to now. However, the performance has been inconsistent, with returns of 3% in 2021, -9% in 2022, and 26% in 2023. In comparison, the S&P 500 had returns of 27% in 2021, -19% in 2022, and 24% in 2023. The Trefis High Quality Portfolio, consisting of 30 stocks, has outperformed the S&P 500 each year in the same period, suggesting less risk and better returns compared to the benchmark index.
Despite potential near-term production declines, Wheaton’s overall production volumes are expected to increase in the long run, with the company projecting average production of over 800,000 GEOs by 2028 and 850,000 GEOs from 2029 to 2033. This marks a significant increase compared to 2023. However, the stock currently trades at around 40x consensus 2024 earnings, a valuation considered high by analysts. A price estimate of $40 per share is below the current market price of $58, with analysts planning to reassess this valuation following the earnings release.
Precious metals prices are expected to remain strong, driven by factors such as easing inflation, concerns about global economic growth, and potential interest rate cuts by the Federal Reserve. Wheaton’s revenue streams and business model will be further analyzed in detail following the earnings release. With uncertainties in the macroeconomic environment, including high oil prices and elevated interest rates, questions arise regarding WPM’s potential performance compared to the S&P 500 over the next year, leading to a wait-and-see approach for investors.
