For Immediate Release
Chicago, IL – November 16, 2010 – Zacks.com Analyst Blog features: Medtronic (MDT), Boston Scientific (BSX), Kinross Gold Corporation (KGC), Barrick Gold Corporation (ABX) and Newmont Gold Mining (NEM).
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Here are highlights from Monday's Analyst Blog:
Medtronic Presents Positive Data
Recently, Medtronic (MDT) presented positive data from its RAFT (Resynchronization/Defibrillation for Ambulatory Heart Failure Trial) study at the American Heart Association in Chicago.
It was observed that the company's cardiac resynchronization therapy-defibrillators (CRT-Ds) reduced the risk of death by 29% in heart patients (NYHA class II) compared to those treated with implantable cardioverter-defibrillators (ICDs) and medical therapy. In addition, it was observed that the incidence of death and hospitalization was also lower by 27%.
Positive data of CRT-Ds is significant for Medtronic since Cardiac Rhythm Disease Management (CRDM) is its largest segment, contributing 33% of total revenues. However, during the first quarter of fiscal 2011, this segment generated $1,226 million in sales, down 8.3% compared to the year-ago period. Revenues derived from both Pacing Systems and Defibrillation Systems declined by 11.8% (to $473 million) and 6.8% (to $722 million), respectively.
Medtronic witnessed a slowdown in the CRDM market growth rate (300 basis points sequentially), which escalated, in late June and through July and was primarily responsible for the dismal performance. From the recently presented data, it was found that the use of CRT-D along with medical treatment and ICDs saves lives of these patients. Although the use of CRT-Ds is not yet approved in the US for class II heart patients, favorable data should help the company fetch approval.
In September, Boston Scientific (BSX) received approval from the US Food and Drug Administration (FDA) for the use of its CRT-Ds in patients with less developed disease. The expanded approval was based on favorable data from the MADIT-CRT trial, with more than 1,800 patients, which demonstrated that CRT-Ds reduce death and heart failure events.
We are currently Neutral on the stock.
Kinross Beats Estimates
Gold miner Kinross Gold Corporation (KGC) recorded net income of $121.6 million or 17 cents per share in the third quarter of 2010, significantly higher than last year's $1.7 million or zero cents per share and surpassed the Zacks Consensus Estimate of 16 cents per share. Including one-time charges, the company earned $123.6 million or 16 cents per share during the quarter.
The results of the company were positively impacted due to the acquisition of the West African company, Red Back Mining Inc., in the third quarter of 2010. Due to this acquisition, Red Backs' Chirano Gold Project in Ghana and the Tasiast Gold Mine in Mauritania were added to Kinross' portfolio.
Quarterly revenues leaped 26% to $735.5 million due to an increase of 24.5% in average realized gold price to $1,190 per ounce. About 11,000 ounces of Red Back assets were also sold.
Gold production increased 7% to 575,065 ounces driven by improved performance at the Paracatu expansion plant, the addition of new production from the heap leach at Fort Knox and the acquisition of Red Back assets. Production in the third quarter also included 20,238 ounces from the Red Back Mining assets in West Africa.
Cost of sales per ounce for Kinross operations (excluding the impact of the Red Back acquisition) was $508, an increase of 9% versus the prior-year quarter. Cost of sales including the impact of the Red Back acquisition was $517 per ounce.
Outlook
Following the completion of the Red Back acquisition, Kinross also included the production from Red Back Mines and revised its production forecast in the range of 2.3 to 2.5 million ounces for fiscal 2010, up from its previous forecast of 2.2 million ounces. The company expects the cost of sales to be in the range of $505–$520 per ounce, up from $460–$490 per ounce.
Capital expenditure guidance has been raised to $550 million (for operations excluding West Africa) from its prior expectation of $590 million. However, Kinross expects capital expenditures for the West Africa operations, from closing of the Red Back transaction until end of 2010, to be $80 million. Total capital expenditures for all Kinross operations are thus expected to be $630 million.
Kinross expects production of about 2.2 million ounces of gold in 2010 at a cost of $460–$490 per ounce. The company expects costs to average at the higher end of the range. In Chile, Kinross expects production of 350,000–380,000 ounces of gold at an average cost of $630–$680 per ounce, down from the initial forecasts of 460,000–480,000 ounces at an average cost of sales of $500–$520 per ounce.
As a result of the Red Back acquisition, Kinross has increased its 2010 exploration forecast from $102 million to $130 million.
Zacks Recommendation
Kinross Gold Corporation, like other gold producers, Barrick Gold Corporation (ABX) and Newmont Gold Mining (NEM) benefits from rising gold prices. We expect Kinross' exploration projects and acquisitions to boost its top line going forward.
However, production levels are shrinking at some of Kinross' existing operations. About 40% of Kinross' gold reserves are located in Chile, which is presently experiencing significant production declines. We expect higher mining and administrative costs to further constrain margins.
Currently, KGC has a short-term (1 to 3 months) Zacks #3 Rank (Hold) and a long-term recommendation of Neutral.
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