We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Newmont (NEM) Rallies 42% in 6 Months: Is it a Good Time to Buy?
Read MoreHide Full Article
Newmont Corporation’s (NEM - Free Report) shares have rallied 41.5% in the past six months, outperforming the Zacks Mining – Miscellaneous industry’s decline of 5%. The bullishness appears to have been catalyzed by its forecast-topping earnings performance in the second quarter on the back of higher gold prices and production.
The stock is currently trading at a roughly 8.5% discount to its 52-week high of $50.72, reached on Aug 2, 2024, thanks to a new all-time high in gold prices.
Technical indicators show that NEM has been unremittingly trading above the 200-day simple moving average (SMA) since Apr 23, 2024. After a series of sporadic movements, the stock broke the 50-day SMA on Jul 3, 2024. Notably, following a golden crossover on May 13, 2024, the 50-day SMA continues to read higher than the 200-day moving average, manifesting a bullish trend, with the 200-day SMA acting as the support level.
Newmont Trades Above 50-Day SMA
Image Source: Zacks Investment Research
Is the time right to buy NEM’s shares for potential upside? Let’s take a look at the stock’s fundamentals.
Newmont Well Placed for Growth on Key Projects & Newcrest Buyout
Newmont continues to invest in growth projects in a calculated manner. The company is pursuing several projects, including Tanami Expansion 2 in Australia, the Ahafo North expansion in Ghana and Cadia Block Caves in Australia. These projects should expand production capacity and extend mine life, thereby driving revenues and profits.
Moreover, the acquisition of Newcrest Mining Limited has also created an industry-leading portfolio with a multi-decade gold and copper production profile in the most favorable mining jurisdictions globally. The combination of Newmont and Newcrest is expected to deliver significant value for shareholders and generate meaningful synergies, with $500 million in total annual pre-tax benefits expected by the end of 2025. NEM also remains on track to meet its 2024 gold production target of around 6.9 million ounces with solid performances of its managed Tier 1 assets and contributions of the sites acquired from the Newcrest buyout.
Solid Financial Health and Attractive Dividend Yield & Payout
Newmont 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. At the end of the second quarter of 2024, Newmont had liquidity of $6.8 billion, including cash and cash equivalents of around $2.6 billion. Its operating cash flow more than doubled year over year to around $1.4 billion. NEM also generated $594 million in free cash flow and returned roughly $539 million to its shareholders through dividends and share buybacks in the quarter.
Moreover, 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. Gold prices are hitting record highs this year, and the yellow metal has been among the best-performing assets. Prices skyrocketed to surpass the $2,500 per ounce level for the first time on Aug 2, 2024, as ebbing inflation raised hopes of a U.S. interest rate cut in September. Increased tensions in the Middle East and concerns over an economic slowdown also fueled safe-haven demand.
NEM also offers a healthy dividend yield of 2.1% (above the S&P 500′s average dividend yield of roughly 2%) at the current stock price. Its payout ratio is 47% (a ratio below 60% is a good indicator that the dividend will be sustainable), with a five-year annualized dividend growth rate of 15.5%. Backed by strong cash flows and sound financial health, the company's dividend is perceived to be safe and reliable.
Rising Earnings Estimates
Earnings estimates for NEM have been going up over the past 60 days, reflecting analysts’ optimism. The Zacks Consensus Estimate for 2024 and 2025 have been revised upward over the same time frame.
The Zacks Consensus Estimate for 2024 earnings is currently pegged at $2.76, reflecting an expected year-over-year growth of 71.4%. Moreover, earnings are expected to register a roughly 22.2% growth in 2025. NEM has a long-term EPS growth rate of 48.5% versus 20.8% for its industry.
Image Source: Zacks Investment Research
Valuation: Bit Stretched But Reasonable
Newmont is currently trading at a forward 12-month earnings multiple of 15.24X, a roughly 29.4% premium to the industry average of 11.78X. The valuation looks reasonable, considering the company’s healthy earnings trajectory.
Image Source: Zacks Investment Research
Newmont Underperforms S&P 500
Newmont’s shares have racked up a gain of 16.3% over the past year, topping the industry’s 6.1% decline but underperforming the S&P 500’s rise of 17.5%. Its gold mining peers, Barrick Gold Corporation (GOLD - Free Report) , Agnico Eagle Mines Limited (AEM - Free Report) and Kinross Gold Corporation (KGC - Free Report) , have gained 2%, 49.2% and 61.4%, respectively, over the same period.
One-Year Price Performance
Image Source: Zacks Investment Research
To Sum Up
With a robust portfolio of growth projects, solid financial health, and bullish technicals, NEM presents a compelling investment case. A healthy growth trajectory, rising earnings estimates and an attractive dividend yield are the other positives. Rallying gold prices should also boost NEM’s profitability and drive cash flow generation. With a positive earnings outlook, Newmont looks poised to deliver attractive returns to investors, making this Zacks Rank #1 (Strong Buy) stock a prudent choice to bet on for those looking to capitalize on favorable gold market conditions.
Image: Bigstock
Newmont (NEM) Rallies 42% in 6 Months: Is it a Good Time to Buy?
Newmont Corporation’s (NEM - Free Report) shares have rallied 41.5% in the past six months, outperforming the Zacks Mining – Miscellaneous industry’s decline of 5%. The bullishness appears to have been catalyzed by its forecast-topping earnings performance in the second quarter on the back of higher gold prices and production.
The stock is currently trading at a roughly 8.5% discount to its 52-week high of $50.72, reached on Aug 2, 2024, thanks to a new all-time high in gold prices.
Technical indicators show that NEM has been unremittingly trading above the 200-day simple moving average (SMA) since Apr 23, 2024. After a series of sporadic movements, the stock broke the 50-day SMA on Jul 3, 2024. Notably, following a golden crossover on May 13, 2024, the 50-day SMA continues to read higher than the 200-day moving average, manifesting a bullish trend, with the 200-day SMA acting as the support level.
Newmont Trades Above 50-Day SMA
Is the time right to buy NEM’s shares for potential upside? Let’s take a look at the stock’s fundamentals.
Newmont Well Placed for Growth on Key Projects & Newcrest Buyout
Newmont continues to invest in growth projects in a calculated manner. The company is pursuing several projects, including Tanami Expansion 2 in Australia, the Ahafo North expansion in Ghana and Cadia Block Caves in Australia. These projects should expand production capacity and extend mine life, thereby driving revenues and profits.
Moreover, the acquisition of Newcrest Mining Limited has also created an industry-leading portfolio with a multi-decade gold and copper production profile in the most favorable mining jurisdictions globally. The combination of Newmont and Newcrest is expected to deliver significant value for shareholders and generate meaningful synergies, with $500 million in total annual pre-tax benefits expected by the end of 2025. NEM also remains on track to meet its 2024 gold production target of around 6.9 million ounces with solid performances of its managed Tier 1 assets and contributions of the sites acquired from the Newcrest buyout.
Solid Financial Health and Attractive Dividend Yield & Payout
Newmont 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. At the end of the second quarter of 2024, Newmont had liquidity of $6.8 billion, including cash and cash equivalents of around $2.6 billion. Its operating cash flow more than doubled year over year to around $1.4 billion. NEM also generated $594 million in free cash flow and returned roughly $539 million to its shareholders through dividends and share buybacks in the quarter.
Moreover, 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. Gold prices are hitting record highs this year, and the yellow metal has been among the best-performing assets. Prices skyrocketed to surpass the $2,500 per ounce level for the first time on Aug 2, 2024, as ebbing inflation raised hopes of a U.S. interest rate cut in September. Increased tensions in the Middle East and concerns over an economic slowdown also fueled safe-haven demand.
NEM also offers a healthy dividend yield of 2.1% (above the S&P 500′s average dividend yield of roughly 2%) at the current stock price. Its payout ratio is 47% (a ratio below 60% is a good indicator that the dividend will be sustainable), with a five-year annualized dividend growth rate of 15.5%. Backed by strong cash flows and sound financial health, the company's dividend is perceived to be safe and reliable.
Rising Earnings Estimates
Earnings estimates for NEM have been going up over the past 60 days, reflecting analysts’ optimism. The Zacks Consensus Estimate for 2024 and 2025 have been revised upward over the same time frame.
The Zacks Consensus Estimate for 2024 earnings is currently pegged at $2.76, reflecting an expected year-over-year growth of 71.4%. Moreover, earnings are expected to register a roughly 22.2% growth in 2025. NEM has a long-term EPS growth rate of 48.5% versus 20.8% for its industry.
Valuation: Bit Stretched But Reasonable
Newmont is currently trading at a forward 12-month earnings multiple of 15.24X, a roughly 29.4% premium to the industry average of 11.78X. The valuation looks reasonable, considering the company’s healthy earnings trajectory.
Newmont Underperforms S&P 500
Newmont’s shares have racked up a gain of 16.3% over the past year, topping the industry’s 6.1% decline but underperforming the S&P 500’s rise of 17.5%. Its gold mining peers, Barrick Gold Corporation (GOLD - Free Report) , Agnico Eagle Mines Limited (AEM - Free Report) and Kinross Gold Corporation (KGC - Free Report) , have gained 2%, 49.2% and 61.4%, respectively, over the same period.
One-Year Price Performance
To Sum Up
With a robust portfolio of growth projects, solid financial health, and bullish technicals, NEM presents a compelling investment case. A healthy growth trajectory, rising earnings estimates and an attractive dividend yield are the other positives. Rallying gold prices should also boost NEM’s profitability and drive cash flow generation. With a positive earnings outlook, Newmont looks poised to deliver attractive returns to investors, making this Zacks Rank #1 (Strong Buy) stock a prudent choice to bet on for those looking to capitalize on favorable gold market conditions.
You can see the complete list of today’s Zacks #1 Rank stocks here.