Wheaton Precious Metals Sees Growth Amid Strengthening Gold and Silver Prices

Wheaton Precious Metals stock has performed well this year, climbing approximately 29% year-to-date, outperforming the S&P 500. Several factors have contributed to this positive trend. Rising prices for gold and silver, influenced by easing inflation, unclear signals from the Federal Reserve, and geopolitical tensions due to ongoing conflicts such as the Russia-Ukraine war, have played a significant role. In addition, Wheaton has expanded its metal streams and royalties, which may enhance production and revenue in the future. Recently added assets include an expansion of the existing stream on Rio2’s Fenix project and a new gold stream from Montage’s Kone project.

Q3 Performance Exceeds Expectations

Wheaton’s Q3 results illustrate strong performance. Adjusted earnings per share reached $0.34, and revenue surged approximately 38% year-over-year to $308 million. The company is on course to meet its annual production goal for 2024, which is estimated between 550,000 and 620,000 gold equivalent ounces. Quarterly production has remained steady compared to the same period last year, with lower output from Salobo and Constancia being offset by increased production from Peñasquito. Notably, the average realized gold price for the quarter was $2,491 per ounce, marking a 28% increase from last year, while the average realized silver price stood at $29.71, up 25% year-over-year.

Stock Performance Over Recent Years

Over the past four years, Wheaton’s stock performance has varied. The annual returns amounted to 4% in 2021, a decline of 8% in 2022, and a comeback of 28% in 2023. In comparison, the Trefis High Quality (HQ) Portfolio, which consists of 30 stocks, has experienced less volatility and consistently outperformed the S&P 500 during the same timeframe.

Market Outlook: Challenges Ahead?

What factors contribute to these differences? HQ Portfolio stocks have generally offered better returns with lower risks than the benchmark index, presenting a steadier ride according to performance metrics. Given the current unpredictable economic environment surrounding interest rate cuts and multiple global tensions, there is concern that WPM might repeat its 2021 experience and underperform the S&P over the next year—though there is also hope for continued growth.

Future Growth Prospects

The company reported record quarterly operating cash flows of $254 million. Looking ahead, Wheaton’s production volumes are expected to rise, aiming for an average output of over 800,000 gold equivalent ounces (GEOs) by 2028. This increase is projected to come from growth in operations at Salobo, Antamina, Voisey’s Bay, and Marmato. Additionally, the prices for precious metals may rise in the long run, as they could be seen as safe havens amid political uncertainties. However, current estimates suggest that WPM’s stock may have already priced in this potential upside. The valuation for Wheaton Precious Metals stands at $63 per share, aligning closely with the current market price.

[1] Returns as of 11/20/2024
[2] Cumulative total returns since the end of 2016

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.