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Why Is Newmont (NEM) Up 1.6% Since Last Earnings Report?

It has been about a month since the last earnings report for Newmont Corporation (NEM). Shares have added about 1.6% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Newmont due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Newmont's Earnings and Sales Miss Estimates in Q2

Newmont reported net income from continuing operations of $412 million or 51 cents per share in second-quarter 2020, up from $1 million or breakeven per share in the year-ago quarter.

Barring one-time items, adjusted earnings were 32 cents per share that missed the Zacks Consensus Estimate of 34 cents.

Newmont reported revenues of $2,365 million, up 4.8% year over year. However, the figure missed the Zacks Consensus Estimate of $2,368.4 million.

Operational Highlights

Newmont's attributable gold production declined 20.8% year over year to 1.26 million ounces in the quarter.

Average realized prices of gold rose 31% year over year to $1,724 per ounce.

The company’s CAS for gold was $748 per ounce, down 1% year over year.

AISC for gold increased 8% year over year to $1,097 per ounce. The uptick was mainly due to care and maintenance costs related to the coronavirus pandemic, which was partly offset by lower sustaining capital spending.

Regional Performance

North America: Attributable gold production in North America was 232,000 ounces, down 8% year over year. Gold CAS for the region was $735 per ounce, down 29% year over year.

South America: Attributable gold production in South America was 136,000 ounces, down 48% year over year. Gold CAS for the region rose 20% on a year-over-year basis to $781 per ounce.

Australia: Attributable gold in the region was 294,000 ounces, down 18% year over year. Gold CAS in the region dropped 1% year over year to $719 per ounce.

Africa: Production in the region totaled 193,000 ounces of gold in the quarter, down 30% year over year. Gold CAS was $696 per ounce, up 16% year over year.

Financial Position

The company ended the second quarter with cash and cash equivalents of $3,808 million, up 108.4% year over year. Long-term debt was $5,478 million, up from $5,475 million in the prior-year quarter.

Net cash from operating activities amounted to $664 million in the quarter.

Outlook

For 2020, Newmont projects attributable gold production of around 6 million ounces. Gold CAS is projected at $760 per ounce and AISC is expected to be $1,015 per ounce on higher sustaining capital spending.

The company is progressing with majority of its development and sustaining capital projects, including Tanami Expansion 2 and Subika Underground as well as advancing laybacks at Boddington and Ahafo.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -25.95% due to these changes.

VGM Scores

Currently, Newmont has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Newmont has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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