With gold prices soaring, it’s not surprising that the estimates on the gold miners are also moving higher. Gold Fields Limited (GFI) is expected to grow its earnings by 134% in 2011.
But it’s not too late to get in. This Zacks #1 Rank (strong buy) is trading at just 12x forward estimates.
Gold Fields is one of the largest producers of gold in the world. The South African-based miner produces 3.6 million gold equivalent ounces from 8 mines in Australia, Ghana, Peru and South Africa.
Production Higher in the Second Quarter
On July 5, Gold Fields announced that second quarter production would be about 5% higher than the first quarter at 872,000 gold equivalent ounces compared to 830,000 ounces in the first quarter.
Production in the South African Region was hit by 6 public holidays as well as 2 seismic-related accidents at the KDC mine which resulted in production stoppages.
The Australasia Region also saw a week-long mill-outage which hurt production.
Zacks Consensus Estimates Rise Ahead of Earnings
Gold Fields is expected to report second quarter results on Aug 11, but the 2011 Zacks Consensus is already starting to inch higher.
In the last 30 days, it has risen 6 cents to $1.26 per share. That is more than double the 54 cents the company made in 2010.
2012 is looking equally as bullish as the Zacks Consensus has jumped to $1.90 from $1.74 in the last month.
That is further earnings growth of 51%.
Caution: Threat of Strikes in South Africa
For several weeks, the National Union of Mineworkers has threatened a nationwide strike of gold, platinum and coal workers if demands for higher wages aren’t met.
Reuters reported that workers wanted a 14% increase and the consortium of gold miners offered just 4% in June.
A strike in South Africa would limit Gold Fields’ production, so it is something to watch.
Valuation Still Attractive
Like its peers, Gold Fields is trading with some very attractive valuations.
Its P/E of 12.2 is well under the 14x the S&P 500 is trading at. It is also cheaper than its peers at 14x.
The company also has a low price-to-book ratio of 1.7, which is well under the 3.0 I use as a cut-off for a “value” stock.
Gold Fields also rewards shareholders with a dividend, currently yielding 1.3%. That is higher than peers such as Barrick Gold (ABX) whose dividend yields just 1.0%.
Shares Not at New High Even as Gold Is
Surprisingly, shares have not hit a new 52-week high even as gold has.
In fact, if you look at the 10 year chart, shares are still trading below 2006 highs.
These are the best of times for the gold miners as gold prices soar. Gold Fields has an attractive valuation plus it is expected to see double digit earnings growth over the next 2 years.
Growth plus value = a powerful combination.
Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the Turnaround Trader and Insider Trader services. You can follow her at twitter.com/traceyryniec.
