Is Newmont Stock a Smart Buy Before Q3 Earnings Release?

Barchart · 10/21 15:02

Newmont Corporation NEM is slated to come up with third-quarter 2024 results after the closing bell on Oct. 23. The mining giant is expected to have benefited from higher gold prices and strong production volumes in the quarter.

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The Zacks Consensus Estimate for third-quarter 2024 earnings has been revised upward in the past 60 days. The consensus estimate for earnings is pegged at 75 cents per share, suggesting a 108.3% year-over-year rise. The Zacks Consensus Estimate for third-quarter revenues currently stands at $4.07 billion, indicating a 63.4% increase from the year-ago quarter.

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NEM beat the Zacks Consensus Estimate for earnings in two of the last four quarters and missed twice. It has a trailing four-quarter earnings surprise of 19.2% on average.

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Q3 Earnings Whispers for NEM Stock

Our proven model does not conclusively predict an earnings beat for NEM this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

NEM has an Earnings ESP of -1.33% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Factors Shaping NEM’s Q3 Results

Newmont’s third-quarter results are likely to have been supported by higher year-over-year production, driven by the addition of the sites acquired in the Newcrest transaction and continued strong performance from its managed Tier 1 portfolio. Production is expected to have been supported by improved grades at Penasquito and Tanami, higher production from Ahafo and improved throughput from Boddington. Our estimate for NEM’s attributable gold production is pegged at 1.72 million ounces for the September quarter, suggesting a 7.3% sequential rise.

The impact of higher gold prices is also 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. The recent rally in gold prices has been supported by the 50-basis-point cut in interest rates by the U.S. Federal Reserve. Gold scaled a record high of $2,722 an ounce last Friday, on growing expectations of another rate reduction in November, uncertainties over the U.S. presidential election, and increased tensions in the Middle East arising from the Israel and Hezbollah conflict and anticipation of Israel’s retaliatory strike against Iran, which fueled safe-haven demand.

Prices of the yellow metal racked up a roughly 4% gain for the third quarter of 2024 and are up roughly 32% this year. Our estimate for average realized prices of gold for NEM stands at $2,476 per ounce, which indicates a sequential rise of 5.5%.

Newmont is also expected to have benefited from lower unit costs from higher production volumes in the quarter to be reported. NEM, on its second-quarter call, said that it expects unit costs to decline in the third and fourth quarters, driven by increased production and the delivery of additional synergies.

Newmont Stock’s Price Performance and Valuation

Thanks to the rally in gold prices, Newmont’s shares have surged 39.2% year to date, underperforming the Zacks Mining – Gold industry’s 43.1% increase but topping the S&P 500’s rise of 22.9%. Its gold mining peers, Barrick Gold Corporation GOLD, Agnico Eagle Mines Limited AEM and Kinross Gold Corporation KGC have rallied 15.6%, 57.1% and 75.4%, respectively, over the same period.

NEM’s YTD Stock Price Performance

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From a valuation standpoint, Newmont is currently trading at a forward 12-month earnings multiple of 16.16X, a roughly 2.1% premium to the peer group average of 15.82X. The valuation looks reasonable considering the company’s healthy earnings trajectory.

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Investment Thesis for NEM Stock

Newmont is well-placed 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 its 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 skyrocketing gold prices, which should boost its profitability and drive cash flow generation.

Final Thoughts: Buy NEM Shares

Investment in NEM stock ahead of its earnings announcement presents a compelling opportunity due to its strong market position, solid financial health, a healthy growth trajectory, rising earnings estimates, favorable gold market conditions and strategic growth investments. With a positive earnings outlook, NEM looks poised to deliver attractive returns to investors, making it a prudent choice to bet on for those looking to capitalize on the record-setting upswing in gold prices.

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Newmont Corporation (NEM): Free Stock Analysis Report
 
Kinross Gold Corporation (KGC): Free Stock Analysis Report
 
Agnico Eagle Mines Limited (AEM): Free Stock Analysis Report
 
Barrick Gold Corporation (GOLD): Free Stock Analysis Report

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