Will This Gold Stock Disappoint Investors?

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This past quarter was terrible for gold. In fact, it was the once-shiny metal's worst quarter in almost 50 years, and its price plunged 23%. That made for a rough quarter for gold miners, including Goldcorp , which reports its latest quarterly results on July 25. Does this mean investors are in for a dull quarter?

Photo Credit: Flickr/Giorgio Monteforti

Managing expectations
Analysts aren't expecting as much from the company, given gold's precipitous fall. The consensus estimate is that Goldcorp will earn about $0.28 a share this quarter, down just pennies from last quarter. However, four of the 14 analysts covering the company have reduced their estimates over the past month, indicating that the company might miss estimates. But analysts' estimates hardly mean much for Goldcorp, which has missed estimates by a double-digit percentage in three of the past four quarters.

What we do know is that Goldcorp can still profit even as gold prices plunge. The company has noted that its all-in sustaining cash cost for gold is $1,135 per ounce, which is well above gold's low in the quarter of around $1,200 an ounce. So, while it's quite possible the company will miss analysts' expectations this quarter, it's not the most important area for investors to watch.

A glittering future?
Instead, the most important area for investors to watch is the company's outlook. Last quarter the company reaffirmed guidance for the full year, but that was before the price of gold plunged. It will be interesting to note what the company's management team sees given what's happened. While it can't control the price of gold, it can control its costs and growth. With a large stable of growth projects in the works, it will be important to watch if the plunge in the price of gold is changing the company's plans. 

Goldcorp has a plan to boost its production 70% by 2017. Among its more recent projects is Pueblo Viejo, a joint venture with Barrick Gold . The mine produced just 47,400 ounces of gold last year, but is expected to produce between 330,000 and 435,000 ounces of gold this year. Bringing that project fully on line will be an important earnings driver for both companies.

After Pueblo Viejo the next big driver for Goldcorp is its Cerro Negro mine in Argentina. The company expects the mine to start producing later this year and be up to 100% capacity (525,000 ounces) by 2015. With several other projects beginning to produce over the next few years, it's easy to see a bright future for the company.

What investors need to do is see past one quarter's earnings and look at the big picture when it comes to gold mining stocks. Production growth from new mines coming on line will drive earnings over the long term as long as the price of gold stays above the company's cost of production. Which is not always easy as Barrick Gold investors have learned as the company ran into a water problem in bringing its Pascua-Lama mine in Chile on line, which has added to its costs and delayed the project. As long as Goldcorp can avoid similar problems, and the price of gold stays well above its production costs, the company should be able to meet its growth targets 

Final Foolish thoughts
Just don't expect a stellar quarter from Goldcorp because the record plunge in gold won't put a shine on its results this time around. Investors need to be thankful that, as a low-cost producer, Goldcorp can profit even as prices plunge. This is why it's always best to have a long-term outlook and see Goldcorp for what it is, a company with a very visible path to long-term growth.

Does that make Goldcorp the best way to play the rebound in gold? For that answer, you'll need to check out The Motley Fool's new free report, "The Best Way to Play Gold Right Now", which dissects the recent volatility and provides a guide for gold investing. Click here to read the full report today!

The article Will This Gold Stock Disappoint Investors? originally appeared on Fool.com.

Fool contributor Matt DiLallo has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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