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Newmont Stock Skids 30% From Its 52-Week High: Should You Buy the Dip?
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Newmont Corporation’s (NEM - Free Report) shares are trading roughly 30% below its 52-week high of $58.72, reached on Oct. 22, 2024, closing at $41.11 last Friday. The pullback in NEM stock partly reflects its lower-than-expected earnings performance in the third quarter and the recent weakness in gold prices. While NEM benefited from higher average realized gold prices and sales volumes in the third quarter, higher unit costs left a dent on its performance.
Technical indicators show that NEM has been trading below the 50-day simple moving average (SMA) since Oct. 24, 2024. Nevertheless, the 50-day SMA continues to read higher than the 200-day SMA since the golden crossover on May 13, 2024, indicating a bullish trend.
NEM Stock Trades Below 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.
Key Projects & Newcrest Buyout to Catalyze NEM’s Growth
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 Panel Caves in Australia. These projects should expand production capacity and extend mine life, driving revenues and profits.
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. NEM has achieved $500 million in annual run-rate synergies following the Newcrest buyout.
Newmont also remains committed to divesting non-core businesses as it shifts its strategic focus to Tier 1 assets. The recent agreement to sell its Akyem operation in Ghana to Zijin Mining Group Co., Ltd. for up to $1 billion in cash is part of this move. In September 2024, NEM agreed to sell its Telfer operation, its 70% stake in the Havieron gold-copper project and other related assets in Australia’s Paterson region to Greatland Gold plc for up to $475 million in gross proceeds. The proceeds from these divestments will support NEM’s capital allocation priorities, which include improving the balance sheet and returning capital to shareholders.
NEM remains committed to Ghana, investing $950 million to $1,050 million in development capital for the Ahafo North gold mining project in Ghana's Ahafo Region. NEM’s attributable gold production jumped around 29% year over year in the third quarter on strong performance from its managed Tier 1 portfolio.
NEM, last month, also agreed to sell its Musselwhite operation in Ontario, Canada, to Orla Mining Ltd for up to $850 million. It also recently announced the divestment of its Eleonore operation in Northern Quebec, Canada, to Dhilmar Ltd for $795 million in cash. NEM has also agreed to sell its Cripple Creek & Victor operation in Colorado to SSR Mining Inc. for up to $275 million. Upon closure of the announced transactions, Newmont will have received up to $3.9 billion in gross proceeds from non-core asset divestitures and investment sales.
Robust Financial Health Supports NEM’s Capital Allocation
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 third quarter of 2024, Newmont had liquidity of $7.1 billion, including cash and cash equivalents of around $3 billion. Its operating cash flow soared around 64% year over year to around $1.6 billion.
NEM also generated $760 million in free cash flow and returned $786 million to its shareholders through dividends and share buybacks in the quarter. Newmont continues to use free cash flow from operations and divestiture proceeds to increase long-term value for shareholders by repurchasing shares. Under this approach, NEM has a $3 billion share repurchase program approved for implementation through October 2026.
NEM offers a dividend yield of 2.4% at the current stock price. Its payout ratio is 39% (a ratio below 60% is a good indicator that the dividend will be sustainable), with a five-year annualized dividend growth rate of 6.8%. Backed by strong cash flows and sound financial health, the company's dividend is perceived to be safe and reliable.
Gold Price Rally to Drive NEM’s Profitability
As a leading gold producer, Newmont stands to benefit significantly from the upswing in gold prices, which should boost its profitability and drive cash flow generation. Gold has been among the best-performing assets this year. The yellow metal has rallied roughly 28% 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 increased tensions in the Middle East. After the pullback due to a rally in the U.S. dollar following Trump's win in the U.S. presidential election, gold prices regained strength after the Federal Reserve cut interest rates by a quarter point. While a stronger U.S. dollar is weighing on the yellow metal, prices are likely to gain support on prospects of another rate cut in December.
NEM’s Higher Production Costs A Concern
Newmont is being challenged by higher production costs, which will likely weigh on its margins over the near term. Its gold costs applicable to sales (CAS) rose roughly 13% year over year in 2023. Newmont also saw a 19% surge in all-in-sustaining costs (AISC) — the most important cost metric of miners. CAS climbed around 18% year over year in the third quarter of 2024. NEM’s AISC also rose around 13% year over year in the quarter. The impacts of increased direct operating costs are leading to cost inflation. Higher materials, labor and contract services costs, despite somewhat easing lately, remain concerns. The company, in particular, is stung by higher labor costs, which constitute about half of its direct costs.
NEM’s FY24 Earnings Estimates Moving Higher
Newmont’s earnings estimates for 2024 have been going up over the past 60 days. The Zacks Consensus Estimate for 2025 has been revised lower over the same time frame.
The Zacks Consensus Estimate for 2024 earnings is currently pegged at $3.08, reflecting an expected year-over-year growth of 91.3%. Earnings are expected to register roughly 14.1% growth in 2025. NEM has a long-term EPS growth rate of 38.7% versus 32.5% for its industry.
Find the latest earnings estimates and surprises on Zacks Earnings Calendar.
Image Source: Zacks Investment Research
Valuation Looks Attractive for NEM Stock
NEM’s attractive valuation should lure investors seeking value. The stock is currently trading at a forward 12-month earnings multiple of 11.8X, lower than its five-year median. This represents a roughly 6% discount when stacked up with the industry average of 12.59X.
Image Source: Zacks Investment Research
Newmont Stock Underperforms Industry and S&P 500
Newmont's shares have gained 5.8% over the past year, underperforming the Zacks Mining – Gold industry’s 26.2% increase and the S&P 500’s rise of 32%. 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 0.6%, 63.4% and 70.5%, respectively, over the same period.
NEM’s One-year Price Performance
Image Source: Zacks Investment Research
Final Thoughts: Hold Onto NEM Shares
NEM presents an attractive investment case backed by a robust portfolio of growth projects, strong performance of its Tier 1 assets and solid financial health. Other positives include a healthy growth trajectory and an attractive dividend yield. Higher gold prices should also boost NEM’s profitability and drive cash flow generation. Despite the upbeat growth prospects, its high production costs warrant caution. Holding onto this Zacks Rank #3 (Hold) stock will be prudent for investors who already own it.
Image: Bigstock
Newmont Stock Skids 30% From Its 52-Week High: Should You Buy the Dip?
Newmont Corporation’s (NEM - Free Report) shares are trading roughly 30% below its 52-week high of $58.72, reached on Oct. 22, 2024, closing at $41.11 last Friday. The pullback in NEM stock partly reflects its lower-than-expected earnings performance in the third quarter and the recent weakness in gold prices. While NEM benefited from higher average realized gold prices and sales volumes in the third quarter, higher unit costs left a dent on its performance.
Technical indicators show that NEM has been trading below the 50-day simple moving average (SMA) since Oct. 24, 2024. Nevertheless, the 50-day SMA continues to read higher than the 200-day SMA since the golden crossover on May 13, 2024, indicating a bullish trend.
NEM Stock Trades Below 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.
Key Projects & Newcrest Buyout to Catalyze NEM’s Growth
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 Panel Caves in Australia. These projects should expand production capacity and extend mine life, driving revenues and profits.
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. NEM has achieved $500 million in annual run-rate synergies following the Newcrest buyout.
Newmont also remains committed to divesting non-core businesses as it shifts its strategic focus to Tier 1 assets. The recent agreement to sell its Akyem operation in Ghana to Zijin Mining Group Co., Ltd. for up to $1 billion in cash is part of this move. In September 2024, NEM agreed to sell its Telfer operation, its 70% stake in the Havieron gold-copper project and other related assets in Australia’s Paterson region to Greatland Gold plc for up to $475 million in gross proceeds. The proceeds from these divestments will support NEM’s capital allocation priorities, which include improving the balance sheet and returning capital to shareholders.
NEM remains committed to Ghana, investing $950 million to $1,050 million in development capital for the Ahafo North gold mining project in Ghana's Ahafo Region. NEM’s attributable gold production jumped around 29% year over year in the third quarter on strong performance from its managed Tier 1 portfolio.
NEM, last month, also agreed to sell its Musselwhite operation in Ontario, Canada, to Orla Mining Ltd for up to $850 million. It also recently announced the divestment of its Eleonore operation in Northern Quebec, Canada, to Dhilmar Ltd for $795 million in cash. NEM has also agreed to sell its Cripple Creek & Victor operation in Colorado to SSR Mining Inc. for up to $275 million. Upon closure of the announced transactions, Newmont will have received up to $3.9 billion in gross proceeds from non-core asset divestitures and investment sales.
Robust Financial Health Supports NEM’s Capital Allocation
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 third quarter of 2024, Newmont had liquidity of $7.1 billion, including cash and cash equivalents of around $3 billion. Its operating cash flow soared around 64% year over year to around $1.6 billion.
NEM also generated $760 million in free cash flow and returned $786 million to its shareholders through dividends and share buybacks in the quarter. Newmont continues to use free cash flow from operations and divestiture proceeds to increase long-term value for shareholders by repurchasing shares. Under this approach, NEM has a $3 billion share repurchase program approved for implementation through October 2026.
NEM offers a dividend yield of 2.4% at the current stock price. Its payout ratio is 39% (a ratio below 60% is a good indicator that the dividend will be sustainable), with a five-year annualized dividend growth rate of 6.8%. Backed by strong cash flows and sound financial health, the company's dividend is perceived to be safe and reliable.
Gold Price Rally to Drive NEM’s Profitability
As a leading gold producer, Newmont stands to benefit significantly from the upswing in gold prices, which should boost its profitability and drive cash flow generation. Gold has been among the best-performing assets this year. The yellow metal has rallied roughly 28% 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 increased tensions in the Middle East. After the pullback due to a rally in the U.S. dollar following Trump's win in the U.S. presidential election, gold prices regained strength after the Federal Reserve cut interest rates by a quarter point. While a stronger U.S. dollar is weighing on the yellow metal, prices are likely to gain support on prospects of another rate cut in December.
NEM’s Higher Production Costs A Concern
Newmont is being challenged by higher production costs, which will likely weigh on its margins over the near term. Its gold costs applicable to sales (CAS) rose roughly 13% year over year in 2023. Newmont also saw a 19% surge in all-in-sustaining costs (AISC) — the most important cost metric of miners. CAS climbed around 18% year over year in the third quarter of 2024. NEM’s AISC also rose around 13% year over year in the quarter. The impacts of increased direct operating costs are leading to cost inflation. Higher materials, labor and contract services costs, despite somewhat easing lately, remain concerns. The company, in particular, is stung by higher labor costs, which constitute about half of its direct costs.
NEM’s FY24 Earnings Estimates Moving Higher
Newmont’s earnings estimates for 2024 have been going up over the past 60 days. The Zacks Consensus Estimate for 2025 has been revised lower over the same time frame.
The Zacks Consensus Estimate for 2024 earnings is currently pegged at $3.08, reflecting an expected year-over-year growth of 91.3%. Earnings are expected to register roughly 14.1% growth in 2025. NEM has a long-term EPS growth rate of 38.7% versus 32.5% for its industry.
Find the latest earnings estimates and surprises on Zacks Earnings Calendar.
Valuation Looks Attractive for NEM Stock
NEM’s attractive valuation should lure investors seeking value. The stock is currently trading at a forward 12-month earnings multiple of 11.8X, lower than its five-year median. This represents a roughly 6% discount when stacked up with the industry average of 12.59X.
Newmont Stock Underperforms Industry and S&P 500
Newmont's shares have gained 5.8% over the past year, underperforming the Zacks Mining – Gold industry’s 26.2% increase and the S&P 500’s rise of 32%. 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 0.6%, 63.4% and 70.5%, respectively, over the same period.
NEM’s One-year Price Performance
Image Source: Zacks Investment Research
Final Thoughts: Hold Onto NEM Shares
NEM presents an attractive investment case backed by a robust portfolio of growth projects, strong performance of its Tier 1 assets and solid financial health. Other positives include a healthy growth trajectory and an attractive dividend yield. Higher gold prices should also boost NEM’s profitability and drive cash flow generation. Despite the upbeat growth prospects, its high production costs warrant caution. Holding onto this Zacks Rank #3 (Hold) stock will be prudent for investors who already own it.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.