Bear of the Day: Centerra Gold (CGAU)

Gold has been one of the hottest trades on Wall Street. Investors have piled into the yellow metal looking for protection against inflation, geopolitical uncertainty, and a weakening dollar. Gold miners have been along for the ride, with some stocks putting up absolutely monster gains.

But here's the thing, kids. Just because gold is going higher doesn't mean every gold miner is a winner. Eventually, earnings matter. And when analysts start cutting their estimates, that's a warning sign you don't want to ignore.

That's exactly what's happening with today's Bear of the Day, Zacks Rank #5 (Strong Sell) Centerra Gold (CGAU). Centerra Gold is a Canadian-based gold mining company with operations centered around its Mount Milligan mine in British Columbia and Öksüt mine in Turkey. The company operates in the Mining – Gold industry, which currently ranks in the Bottom 27% of our Zacks Industry Rank.

Centerra Gold Inc. Price and Consensus

Centerra Gold Inc. price-consensus-chart | Centerra Gold Inc. Quote

The reason for the unfavorable Zacks Rank comes down to earnings estimate revisions. Over the last sixty days, two analysts have lowered their earnings estimates for the current year. Two have also cut their numbers for next year. Not a single upward revision in either period. Those bearish moves have pushed the Zacks Consensus Estimate for the current year down from $1.62 to $1.52 per share. That's nearly a 6% haircut in just two months.

Next year's estimate currently sits at $1.97, up from $1.90 sixty days ago, but the individual downward revisions are a reminder that analysts aren't exactly seeing eye to eye on the company's prospects.

Centerra actually delivered a positive earnings surprise in its latest quarter. Earnings came in 12.12% better than expectations. Revenue growth has been respectable too, with quarterly sales increasing nearly 27% year over year.

You'd think that would be enough to get analysts excited. Apparently not. Despite those numbers, the current-quarter earnings estimate has slipped from 38 cents to 34 cents over the last sixty days. That's more than a 10% decline in expectations.

A quick look at the Price, Consensus and EPS Surprise Chart tells the story. The stock has enjoyed an impressive rally, gaining more than 40% year to date and over 72% during the last twelve months. Meanwhile, current-year earnings expectations have been heading in the opposite direction. That's the sort of divergence that makes me nervous.

There are a few names in the Mining – Gold industry which are still in the good graces of our Zacks Rank. These include Zacks Rank #2 (Buy) stocks Dakota Gold (DC) and Fury Gold Mines (FURY).

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This article originally published on Zacks Investment Research (zacks.com).

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