Resilient gold boosts Randgold

Gold’s improved performance has helped Randgold’s profitability over the last three months. 

Randgold gold bar
Source: Bloomberg

On Monday 9 February Randgold Resources is due to release fourth-quarter figures. The adjusted earnings per share is expected to improve from $0.63 to $0.662, while sales are expected to jump to $312 million from $283.234 million. The company’s pre-tax profit should be almost unchanged at $79.7 million. However, fourth quarter profit year-on-year is expected to fall by as much as 38.5% from, $129.72 million.

It is worth noting that Randgold Resources is the best performing mining stock in the FTSE by a healthy margin, but this has not been enough to encourage institutional analysts. Of those rating the company, eight have them as a buy 11 as a hold and two as a sell. It is also worth noting that the average price target for the next twelve months is £52.31 – over £3 below the current share price.

The performance of Randgold is intrinsically linked to the performance of gold, and the rally that the precious metal has had over the last three months has helped drive the share price 24.7% higher. Every move in the gold price has a direct knock-on effect to Randgold’s bottom line profitability, and the recent uncertainties in the Eurozone, along with the European Central Bank’s decision to embark on a quantitative easing scheme, have helped. It is also worth remembering that the anticipated dates for interest rates rising for the UK and US have been pushed further away, helping the allure of the precious metal.

The recent run in the shares looks to have become a little exhaustive, and with gold beginning to drift lower too we could see the shares looking for support closer to their July 2014 highs around the £52 region.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 79% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money. Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.