With Production Set To Pick Up, Is Wheaton Stock A Buy?
Wheaton Precious Metals stock (NYSE:WPM) posted a tough set of Q4 2022 results that missed expectations. Revenue declined by about 15% year-over-year to $236 million due to weaker production and price realizations. Non-GAAP EPS came in at $0.23 per share down by 22% compared to the last year. Wheaton produced 70-kilo ounces of gold, down by 20% from last year. Silver production was down 16% versus last year. This was largely due to lower production at the company’s Salobo, Penasquito, and Voisey Bay mines and also due to the closure of the Stratoni mines. Gold price realizations were down by about 4% versus the last year. Gold production for the full year stood at 287 kilo-ounces, well below the guidance of as much as 320 kilo-ounces.
So what is the outlook like for Wheaton? Gold prices have firmed up a bit this year, driven by easing inflation, with the yellow metal trading at about $1,887 per ounce, up about 3% year-to-date. For the month of March, the Cleveland Fed projects inflation at 5.37%, down from about 6.4% in January and a recent peak of almost 9% in June 2022. The U.S. Federal Reserve has also scaled back on the pace of its interest rate hikes, with the most recent hike standing at 0.25%, down from multiple rate hikes of 0.75% in 2022. There has also been considerable stress on the banking system of late, following the fallout of Silicon Valley Bank and this could also help prices for safe-haven assets such as gold.
Wheaton’s overall production volumes are also set to pick up. For 2023, the company expects to produce at least 320,000 to 350,000 of gold, marking an increase of at least 12% from 2022 levels. The company’s longer-term production outlook also looks strong, with an average production of all metals (gold, silver, palladium, and cobalt) over the next five years expected to stand at roughly 810,000 gold-equivalent ounces between 2023 and 2028, due to higher anticipated production growth from Salobo, Stillwater, and other mines. This compares to just 638,113 gold-equivalent ounces of total production in 2022. We estimate Wheaton Precious Metals valuation at $42 per share, which is slightly ahead of the current market price. See our analysis of Wheaton Precious Metals revenue for more details on the company’s business model and key revenue streams.
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| Returns | Mar 2023 MTD [1] |
2023 YTD [1] |
2017-23 Total [2] |
| WPM Return | -3% | 4% | 109% |
| S&P 500 Return | -3% | 1% | 72% |
| Trefis Multi-Strategy Portfolio | -4% | 2% | 222% |
[1] Month-to-date and year-to-date as of 3/13/2023
[2] Cumulative total returns since the end of 2016
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