Newmont Corporation NEM is slated to come up with second-quarter 2024 results after the closing bell on Jul 24. The mining giant is expected to have benefited from higher gold prices and increased production volumes in the quarter.
The Zacks Consensus Estimate for second-quarter 2024 earnings has been revised 6% upward in the past 60 days. The consensus estimate for earnings is pegged at 53 cents per share, suggesting a 60.6% year-over-year rise. The Zacks Consensus Estimate for revenues currently stands at $3.49 billion, indicating a roughly 30% increase from the year-ago quarter.
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The company missed the Zacks Consensus Estimate for earnings in three of the last four quarters while beating once. It has a trailing four-quarter earnings surprise of roughly 6.4% on average.
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Earnings Whispers
Our proven model predicts an earnings beat for NEM this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earning beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Newmont has an Earnings ESP of +3.15% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Factors Shaping Q2 Results
The company’s second-quarter results are likely to have been supported by higher production, driven by the addition of the sites acquired in the Newcrest transaction and continued strong production from its managed Tier 1 portfolio. The ramp-up of operations at Penasquito and improved production from Tanami following a decline in the prior quarter due to mill shutdown and rainfall impacts are likely to have aided its production.
Our estimate for attributable gold production is pegged at 1.71 million ounces for the June quarter, suggesting a 2.4% sequential rise.
Newmont is also expected to have benefited from sequentially lower unit costs from higher production volumes in the quarter to be reported. NEM, on its first-quarter call, said that it expects unit costs to improve through 2024, driven by increasing production and the delivery of synergies from portfolio optimization. The lowest unit cost is expected to come from its managed Tier 1 portfolio.
Our estimate for all-in-sustaining costs stands at $1,400 per ounce, which indicates a sequential decline of 2.7%.
The impacts of higher gold prices are expected to reflect on Newmont’s results in the to-be-reported quarter. Higher realized gold prices coupled with improved production are expected to have driven its top line.
Gold prices are hitting record highs this year, and the yellow metal has been among the best-performing assets. Gold has rallied roughly 16% this year driven by strong demand from central banks, a dovish Fed interest rate outlook, global uncertainties and a surge in safe-haven demand thanks to geopolitical tensions. Notably, prices of the yellow metal racked up a roughly 4% gain for the second quarter of 2024.
Price Performance and Valuation
Thanks to the rally in gold prices, Newmont’s shares have gained 13.6% year to date, topping the industry’s 10.4% decline but underperforming the S&P 500’s rise of 14.3%. Its gold mining peers, Barrick Gold Corporation GOLD, Agnico Eagle Mines Limited AEM and Kinross Gold Corporation KGC have gained 1.7%, 35.2% and 45.8%, respectively, over the same period.
YTD Price Performance
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From a valuation standpoint, Newmont is currently trading at a forward 12-month earnings multiple of 15.6X, a roughly 26.9% premium to the peer group average of 12.29X. The valuation looks reasonable considering the company’s healthy earnings trajectory.
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Investment Thesis
Newmont is strongly positioned for growth with a robust portfolio of projects, which should expand production capacity and extend mine life, thereby driving revenues and profits. The acquisition of Newcrest Mining Limited has also created an industry-leading portfolio and is expected to deliver significant value for shareholders and generate meaningful synergies.
NEM has a strong liquidity position and generates substantial cash flows, which allows it to fund its growth projects, meet short-term debt obligations and drive shareholder value. As a leading gold producer, Newmont stands to benefit significantly from the record-setting upswing in gold prices, which should boost its profitability and drive cash flow generation.
Final Thoughts
Investment in NEM stock ahead of its earnings announcement presents a compelling opportunity due to several reasons including its strong market position, solid financial health, a healthy growth trajectory, rising earnings estimates, favorablegold marketconditions and strategic growth investments. With a positive earnings outlook, Newmont looks poised to deliver attractive returns to investors, making it a prudent choice to bet on for those looking to capitalize on the anticipated strong second-quarter results and seeking exposure to the gold mining space.
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