Should You Buy, Sell, or Hold B2Gold Before Q2 Earnings?

B2Gold Corp BTG is expected to report a year-over-year improvement in earnings when it reports second-quarter 2024 results on Aug 8.

The Zacks Consensus Estimate for B2Gold's second-quarter bottom line has moved up over the past 30 days. It is pegged at 8 cents per share, suggesting 14.3% growth from earnings of 7 cents reported in the second quarter of 2023.

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A Mixed Earnings Surprise History

B2Gold's earnings beat the Zacks Consensus Estimates in two of the trailing four quarters and missed twice. The company has a trailing four-quarter negative earnings surprise of 1.10%, on average. The trend is shown in the chart below.

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Lesser Chance of Q2 Earnings Beat

Our proven model does not conclusively predict an earnings beat for B2Gold this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that is not the case here.

Earnings ESP: BTG has an Earnings ESP of -1.32%.

Zacks Rank: The company currently carries a Zacks Rank of 2.

Factors Likely to Shape Q2 Results

Gold demand was reported at 1,258 tons in the second quarter, 4% higher than the year-ago quarter. Further, this was the highest second quarter on record. Average prices were a record $2,338 an ounce in the quarter, marking 18% year-over-year growth. Contributing factors include heightened geopolitical tensions, a weaker U.S. dollar, elevated demand and increasing speculation for monetary policy easing. Higher gold prices are expected to have supported the quarterly earnings performance of B2Gold. 

BTG's total gold production from its three operating mines was 214,339 ounces in the first quarter of 2024, down 14.5% year over year. Increased output from the Masbate Mine due to higher mill throughput and the Otjikoto Mine on higher-than-anticipated mill feed grade were offset by lower production from the Fekola mine. It was in line with the company's expectations.

We expect the second-quarter production to have been at par with the first-quarter 2024 reported level. Compared to BTG's production of 245,961 ounces in the second quarter of 2023, this suggests a year-over-year decline. However, higher gold prices are likely to have offset the lower production and boosted BTG's quarterly top-line performance.

We expect both cash operating costs and AISC costs for the second quarter to have been higher than those reported in the year-ago quarter. While this is likely to have somewhat dent earnings, higher revenues on elevated gold prices are expected to have offset the impacts.

On Jun 21, 2024, BTG announced that it had lowered its stake in Calibre Mining from 14.1% to 4%. As the sale took effect near the end of the quarter, the impacts of contributions from Calibre Mining are expected to get reflected in its second-quarter results. We expect the contributions from Calibre Mining to be slightly lower than the 11,377 ounces recorded in the first quarter of 2024.

We expect BTG to update its consolidated guidance for 2024 during its upcoming results, as it will no longer consolidate production from Calibre Mining. B2Gold's annual gold production forecast for 2024 was between 860,000 ounces and 940,000 ounces (which included 40,000-50,000 attributable ounces from Calibre Mining).

Price Performance & Valuation

BTG's Price Performance Vs Industry, Sector & S&P500

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Shares of B2Gold have gained 12.2% in the past three months against the industry's 7.3% growth. Meanwhile, the Zacks Basic Materials sector has declined 6.5% and the S&P 500 has gained 3.2%.

Currently, BTG is trading at a discount, with a forward 12-month P/S of 1.67X compared with the industry's 3.11X and lower than the median of 1.87X, reflecting a good opportunity for investors.

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The company is also cheaper than other gold miners, Kinross Gold Corporation KGC, Newmont Mining Corporation NEM and Barrick Gold GOLD, who are trading at price-to-sales ratios of 2.38X, 3.19X, and 2.29X, respectively.

Again, B2Gold's trailing 12-month return on equity of 8% is better than its industry average of 6%.

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Investment Thesis

Gold prices are expected to scale higher on upbeat demand prospects amid limited supply. B2Gold is poised well to benefit from this trend by maximizing production at its existing mines, advancing development and exploration projects, and investing in junior exploration companies. The Goose project is set for its first gold pour in the first quarter of 2025. The project ranks among the highest-grade undeveloped gold projects globally. Production at Fekola will be down this year due to the ongoing capital programs but will increase in 2025. All-in-sustaining costs will drop as these programs are completed. Despite investing in projects, BTG maintains a strong cash position and pays industry-leading dividends.

Conclusion

The current trend in gold prices positions B2Gold favorably for upbeat second-quarter results. With a solid pipeline of growth projects, financial health and cheaper valuation compared with the industry, the BTG stock presents a solid investment case for investors keen on the gold-mining space. Another compelling reason to add the stock to one's portfolio is its attractive dividend yield of 5.61% and payout ratio of 64%. Impressively, its yield has been consistently above the industry average over the past four years.

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