What To Expect From Wheaton Precious Metals Q2 Results

Wheaton Precious Metals stock (NYSE: WPM) is poised to publish its Q2 2024 results on August 8, reporting on a quarter that saw gold prices move considerably higher. We estimate that the company’s revenue will come in at about $312 million, up about 28% year-over-year, and slightly ahead of the consensus. Earnings are expected to come in at about $0.31 per share, roughly flat compared to last year and in line with consensus estimates. So what are some of the trends that are likely to drive the company’s earnings for the quarter?

Wheaton’s production was weighed down by multiple factors over 2023, including the strike in the Peñasquito mine in Mexico. Things have picked up this year. Over Q1 2024, attributable gold equivalent production stood at 160,100 ounces, marking an increase of 19% year-over-year. Growth was driven by mill throughput expansion at the Salobo mine in Brazil and higher production at Constancia in Peru where there was more activity in the high-grade zones. We could see production rise over Q2 as well. Prices for precious metals such as gold, which accounts for a bulk of Wheaton’s revenue, have been trading at near all-time highs in recent months. Gold prices have risen from levels of around $2,050 per ounce in early January to levels of over $2,390 per ounce toward the end of June, driven by cooling inflation, expectations of interest rate cuts by the Federal Reserve, and geopolitical uncertainties following the Israel-Gaza war. This should also help the company’s price realizations and revenues.

WPM stock has shown strong gains of 40% from levels of $40 in early January 2021 to around $55 now, vs. a similar change for the S&P 500 over this roughly 3-year period. However, the increase in WPM stock has been far from consistent. Returns for the stock were 3% in 2021, -9% in 2022, and 26% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 – indicating that WPM underperformed the S&P in 2021. In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks; for heavyweights in the Materials sector including LIN, SHW, and RIO, and even for the megacap stars GOOG, TSLA, and MSFT.

In contrast, the Trefis High Quality Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could WPM face a similar situation as it did in 2021 and underperform the S&P over the next 12 months – or will it see a strong jump?

Precious metals prices should hold up, driven by easing inflation, concerns about global economic growth, and the updates from the Fed that it could cut interest rates over 2024. Moreover, despite near-term production declines, Wheaton’s overall production volumes are also set to pick up in the long run, with the company guiding average production of all metals (gold, silver, palladium, and cobalt) of 800,000 GEOs by 2028 and over 850,000 GEOs from 2029 to 2033. This marks an increase of over 35% compared to 2023. However, the stock trades at roughly 40x consensus 2024 earnings, which we believe is somewhat high. We estimate Wheaton Precious Metals valuation at $40 per share, which is well below the current market price of $58. We will be revisiting our price estimate for WPM following the earnings release. 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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