4 Mining Stocks Poised To Outshine Q4 Earnings Estimates

The mining industry is housed within the broader Zacks Basic Materials sector. Earnings growth for the Basic Materials sector in Q3 was second only to the energy sector. Overall earnings for the sector climbed 42% while revenues spiked 16.5%.

However, the earnings picture for Q4 looks lackluster. The Basic Materials sector is expected to lose momentum in Q4 as earnings for the sector are projected to decline 1.4% on 2.2% higher revenues, per the latest Earnings Preview. In fact, the sector is among the four Zacks sectors that are expected to see lower year-over-year earnings in Q4.

The mining industry had a turbulent 2018, weighed down by a slump in metals prices. Metal prices remained subdued last year due to the trade tussle between the United States and China. Further, concerns over a possible slowdown in China, the biggest metal consumer, also weighed on prices.

Gold and silver prices dropped in 2018 primarily owing to global trade tensions and a stronger dollar. The trade friction between the United States and China compelled investors to dump emerging market currencies and seek safe haven in dollar. Upbeat U.S. economic data also caused the greenback to rally. Notably, a stronger dollar makes dollar-priced gold costlier for non-U.S. investors. Another factor that worked against the precious metals last year is the U.S. Federal Reserve’s interest rate hikes. Higher U.S. rates normally weigh on gold and silver.

Nevertheless, prices of precious metals have gained some lost ground of late. In particular, gold prices have broken above the psychologically important $1,300 an ounce threshold. Prices have found support from the Federal Reserve’s dovish turn, geopolitical worries, and global growth concerns. The Fed left interest-rates unchanged at its recently concluded meeting and pledged to adopt a measured approach to further rate hikes considering the prevailing economic situation.

Meanwhile, the gold mining industry is currently witnessing a consolidation wave. The big players in this space are taking the consolidation route to boost their production as well as growth profile amid weakness in prices and depleting gold reserves. The recently completed merger of Barrick Gold Corporation (GOLD  - Free Report) and Randgold Resources, and the proposed $10 billion mega-merger between Newmont Mining Corporation (NEM  - Free Report) and Goldcorp Inc. (GG - Free Report) bear huge testimony to these strategic moves.

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