Unbelievable Gains for the Goldcorp Inc. (GG) in 2016

Goldcorp. Inc, (GG: NYSE) started the year at $11.56 on 1 January. The gold mining industry appreciated on the back of global volatility vis-à-vis crude oil and equities weakness. That traders and investors were flocking to gold as a safe-haven investment is typical during times of geopolitical uncertainty. The gains in gold-mining industries are expected in this type of economic climate and this is precisely what happened with Goldcorp. Inc. The stock appreciated by 50.52% from its closing price on 1 January 2016. Today (21st of April 2016) Gold Corp. is trading at $17.39 per share for a gain of 2.05% (+ $0.35). This is clearly evident in the above chart which reflects the stellar performance of this mining company. If we extrapolate the performance of the company over the past 1 year, it paints a poor picture with -10.86% declines over the past year. However, with 2016 in mind and the Q1 earnings slated to be released on Wednesday, April 27, 2016, there is positive expectation ahead of the upcoming earnings report.

This is what analysts from Zacks Investment Research are expecting in the lead up to the earnings reports on Wednesday: the consensus earnings-per-share forecast for January through March 31 is $0.04, which is $0.03 higher than the same period 1 year ago. If we look back at the performance of Goldcorp Inc over the past 1 year, there is very little to get excited about, especially in Q4 2015. These are the results posted by Goldcorp and the consensus earnings forecasts by analysts:

• On 30 April 2015, the consensus earnings-per-share forecast was $0.10 and the actual earnings per share was $0.01 leading to a -90% earnings surprise
• On 30 July 2015, the consensus earnings-per-share forecast was $0.07 and the actual earnings per share was $0.08, leading to a +14.29% earnings surprise
• On 29 October 2015, the consensus earnings-per-share forecast was $0.05 and the actual earnings per share was $-0.04, leading to a -180% earnings surprise
• On 25 February 2016, the consensus earnings-per-share forecast was $0.03 and the actual earnings per share was $-0.15, leading to a -600% earnings surprise

While the last two financial quarters rocked the foundations of Goldcore investors to their core, these reports are more reflective of global economic sentiments then they are of the structural strength of the company. If the share price is anything to go by in 2016, EPS forecast and actual results are likely to be closer together in Q1 2016. Analysts have not budged on their mean recommendation for Goldcorp Inc from last week to this week. The consensus forecast remains 2.6 on a rating scale of 1.0 (strong buy) to 5.0 (strong sell). Analysts from Thompson/First Call also estimate the mean target price at $17.84 per share with a high of $22 and a low of $12.30. But perhaps the most damning indictments of Goldcorp Inc come from the upgrades/downgrades history of the stock in 2016. The following data has been provided:

• On 13 January 2016, Credit Suisse downgraded GG from an outperform to a neutral rating
• On 12 February 2016, CIBC downgraded GG from a sector outperform to a sector perform rating
• On 26 February 2016, TD Securities downgraded GG from a buy to a hold rating
• On 26 February 2016, Deutsche Bank downgraded GG from a hold to a sell rating
• On 29 February 2016, Citigroup downgraded GG from a buy to a neutral rating
• On 15 March 2016, Macquarie downgraded GG from an outperform to a neutral rating
• On 28 March 2016, UBS downgraded GG from a buy to a neutral rating
• On 11 April 2016, RBC Capital Markets downgraded GG from a sector perform to an underperform rating

In all instances, the upgrades/downgrades history has been strongly bearish for Goldcorp Inc. this indicates that in spite of the strong performance of its share price, investors are simply unwilling to go long on the stock. The recommendation trends of the past 3 months have definitely shifted away from a strong buy and a buy rating towards a hold or an underperform rating.