Franco-Nevada Corp. (FNV:TSX; FNV:NYSE) released earnings for the first quarter of 2017 on May 9. It announced that it sold a record 131,578 gold equivalent ounces, a 23.4% increase year-over-year, and booked $172.7 million in revenue, also a record and a 30.8% year-over-year increase. The company also announced that it was raising its dividend to $0.23/share from the previous $0.22/share, the 10th consecutive annual dividend increase.
These results were welcomed by analysts. Analyst Michael Siperco of Macquarie Research wrote on May 10 that the first quarter results "continue to highlight the strength of FNV's portfolio of 46 producing mines, 41 advanced projects and +190 exploration assets, as well as the growing oil & gas portfolio. With EBITDA margins of ~75%, we continue to view FNV as a defensive way to get precious metal exposure, while maintaining significant optionality to higher prices in the exploration/early stage portfolio and increasing dividends."
Siperco also wrote that while Franco-Nevada trades at a premium to its peers, "we expect the premium to be maintained on continued growth from the diversified portfolio through 2020. While producers should outperform FNV (and the royalty/stream sector) if gold/silver prices rally in 2H17 (as we forecast), we believe that FNV will continue to be a core holding for investors looking for low-risk exposure to precious metals in a dividend-paying vehicle."
Macquarie has an Outperform rating on Franco-Nevada and a target price of CA$95.
Analyst Andrew Kaip of BMO Capital Markets noted that Franco's earnings per share of $0.26 were "well above our estimate of $0.16 and consensus of $0.22 on the back of much higher-than-expected revenue from all metal segments and Oil & Gas." He also noted that Franco-Nevada "finished the quarter with $283M in cash and equivalents and has access to $1.1B in credit facilities."
Kaip stated that "we believe shares of FNV should outperform peers on Q1 results and have increased our target price to $100." Franco-Nevada is currently trading around $94.
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Disclosures from Macquarie Research, Franco-Nevada, May 10, 2017
Analyst certification: We hereby certify that all of the views expressed in this report accurately reflect our personal views about the subject company or companies and its or their securities. We also certify that no part of our compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report. The Analysts responsible for preparing this report receive compensation from Macquarie that is based upon various factors including Macquarie Group Ltd total revenues, a portion of which are generated by Macquarie Group’s Investment Banking activities.
Important disclosure information regarding the subject companies covered in this report is available here.
BMO Capital Markets, Franco-Nevada, May 9, 2017
Analyst's Certification: I, Andrew Kaip, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.
Analysts who prepared this report are compensated based upon (among other factors) the overall profitability of BMO Capital Markets and their affiliates, which includes the overall profitability of investment banking services. Compensation for research is based on effectiveness in generating new ideas and in communication of ideas to clients, performance of recommendations, accuracy of earnings estimates, and service to clients.
Analysts employed by BMO Nesbitt Burns Inc. and/or BMO Capital Markets Limited are not registered as research analysts with FINRA. These analysts may not be associated persons of BMO Capital Markets Corp. and therefore may not be subject to the FINRA Rule 2241 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.
Company Specific Disclosures
Disclosure 5: BMO Capital Markets or an affiliate received compensation for products or services other than investment banking services within the past 12 months from Franco-Nevada.
Disclosure 6C: Franco-Nevada is a client (or was a client) of BMO Nesbitt Burns Inc., BMO Capital Markets Corp., BMO Capital Markets Limited or an affiliate within the past 12 months: C) Non-Securities Related Services.
Disclosure 8A: BMO Capital Markets or an affiliate has a financial interest in 1% or more of any class of the equity securities of Franco-Nevada.
Disclosure 8C: BMO Capital Markets or an affiliate has a financial interest in 0.5% or more in the issued share capital of Franco-Nevada.
Disclosure 9: BMO Capital Markets makes a market in Franco-Nevada.
Disclosure 16: A BMO Nesbitt Burns Inc. research analyst has extensively viewed the material operations of Franco-Nevada.
Disclosure 17: Franco-Nevada has paid or reimbursed some or all of the BMO Nesbitt Burns Inc. analysts travel expenses.