RTGAM



Deutsche Bank estimates that the price of gold will rise to $1,600 (U.S.) an ounce this year and $2,000 an ounce next year, so it is little wonder that analyst Jorge Beristain recently increased his recommendation on Goldcorp Inc. Gold's nominal record high was $1423 in early December, and the price isn't far from that level now.

Last week, Mr. Beristain raised his recommendation to a "buy" from a "hold," while maintaining a $60 price target. Now comes the justification - which combines a bullish gold assumption with rising production volume.

"Goldcorp is on track to deliver about 70 per cent higher gold output by 2015 versus 2010, keeping costs in check, with a healthy balance sheet as well as paying a dividend yield of about 1 per cent, which puts its cash return to shareholders on par with its slower-growth peers," he said in a note. "As a result, we have become more constructive on the stock."

The bullish underlying assumptions in the gold price translate into robust earnings assumptions of $4.02 a share in 2012 - which, by Mr. Beristain's reckoning, are 59 per cent higher than the average forecast among his peers.

Last week, Goldcorp reported fourth quarter earnings of $331.8-million or 44 cents a share - up from just 9 cents a share in the fourth quarter of 2009. The company's operating earnings of 57 cents a share, which exclude foreign exchange losses, topped analysts' expectations by a hefty margin.

Still, analysts as a group on bullish on the stock, with 18 "buy" recommendations versus three "holds" and one "sell," according to Bloomberg. And despite Mr. Beristain's bullish earnings estimates, his $60 price target is actually in line with his peers.