Shares of gold streaming and royalty company Franco-Nevada (NYSE: FNV) closed nearly 1.3% higher on Tuesday, edging past the S&P 500 index’s 1.1% gain. The catalyst for the rise came after two analysts raised their price targets on the stock following the company’s latest earnings release, which exceeded market expectations.
Two analysts covering Franco-Nevada simultaneously increased their fair value assessments for the stock. Notably, both raised it by the same amount to the same target price. TD Securities’ Derick Ma and Scotiabank’s Tanya Jakusconek now value the stock at $184 per share (up from their previous $182). However, both analysts maintained their respective “Hold” recommendations.
The target hikes came after Franco-Nevada reported second-quarter results featuring a convincing bottom-line beat. The company achieved quarterly revenue of $369.4 million, representing a substantial 42% year-over-year increase. GAAP net income more than tripled to $247.1 million ($1.28 per share).
Despite this significant growth, Franco-Nevada’s key performance metrics were not far off consensus analyst estimates, which had called for revenue of $375.9 million and GAAP earnings per share of $1.13.
Management attributed the growth to higher overall gold prices and the acquisition of a royalty interest in a Canadian mine.
Franco-Nevada did not provide any financial guidance but did issue sales volume guidance for the entirety of 2025. The company anticipates precious metal sales will range between 385,000 and 425,000 gold equivalent ounces (GEOs) for the year, with total GEOs expected to land between 465,000 and 525,000. Corresponding figures for the first six months of the year were 193,072 GEOs and 238,678 GEOs, respectively.
A major challenge for traditional miners is the high cost of operating mines, which often leads to losses when precious metal prices are low. Franco-Nevada sidesteps this risk through its unique business model.
It provides miners with upfront cash (used for mine construction, expansion, etc.) in exchange for the right to purchase gold and other metals at advantaged prices in the future – known as streaming and royalty agreements. Essentially, Franco-Nevada locks in favorable prices, ensuring a profit margin when it sells the acquired precious metals.
The sustainability of Franco-Nevada’s business model is evidenced by its dividend track record. While the dividend yield is modest at 0.9%, the Canadian company has increased its dividend annually for 18 consecutive years – roughly the length of its operational history.
The miner’s other key strength lies in diversification. While gold and silver streams constitute the lion’s share of its assets, Franco-Nevada also invests in energy and other metals. Given the volatility of gold prices, diversifying with other “hard assets” is prudent for most investors. Franco-Nevada offers this hedge through broader commodity exposure than its closest peers.
