Shares of Rangold Resources Ltd. (ADR) (NASDAQ: GOLD) recovered nicely on Monday afternoon after a mid-day downgrade from Buy to Hold by Deutsche Bank sent the stock’s share price tumbling.
In their note, Deutsche Bank analysts explained that they believe Rangold has “run out of upside.”
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The Downgrade
The main focus of the Deutsche Bank note on the stock had to do with the 24 percent rise year-to-date. At current levels, the stock is within reach of Deutsche Bank’s price target.
Analysts praise the company’s strong performance to this point, including its impressive cash flow and balance sheet. They also like the proposed dividend hike. “We think the proposed 20 percent increase in the dividend is a nod in the right direction – on our analysis, the group can double its dividends during 2016 if spot prices hold,” analysts explained.
The Numbers
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Rangold recently reported a 26 percent increase in production in 2014. In addition, group unit cash costs were down 2 percent for the year. However, despite the strong execution, Rangold suffered from an 8 percent decline in gold prices, which ultimately translated to a 16 percent decline in earnings per share (EPS) for the year.
Rangold’s 2014 EPS of $2.54 fell short of analysts’ expectations of $2.84. The company reported $382 million in Capex for the year, in line with analysts’ forecast.
Deutsche Bank increased its 2015 EPS forecast for Rangold by 7 percent, mostly due to adjustments to corporate costs including lower gold prices, which ultimately translated to a 16 percent decline in earnings per share (EPS) for the year.
Stock Briefly Reacts
Shares of Rangold briefly spiked down to lows of the day on high volume at around 1 p.m. Monday, February 9 when the downgrade was issued.
However, the stock quickly erased those gains and closed the trading day up more than 1 percent.
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