Newmont Corporation, one of the world’s largest gold miners, is set to report its Q2 2024 results on July 25. The company is expected to see strong revenue of nearly $5.70 billion for the quarter, surpassing consensus estimates, with earnings at around $0.98 per share. These numbers represent a significant year-over-year growth, driven by rising gold prices and the acquisition of Newcrest. The company’s production of gold and other precious metals has also increased, with higher price realizations expected as gold prices continue to climb.
Newmont’s margins are anticipated to improve as the company integrates the Newcrest acquisition and realizes synergies. The company is on track to achieve $500 million in annual synergies by 2025 and has already seen $105 million in synergies from the deal. Additionally, Newmont is reducing costs by divesting non-core assets, with consumable costs such as explosives decreasing. The company’s focus on cost reduction and operational efficiency is expected to boost profitability in the coming quarters.
Despite the positive outlook for Newmont, the stock has underperformed the market in recent years, with a 15% decline since early 2021. NEM’s returns in 2021, 2022, and 2023 were lower than the S&P 500, indicating a challenging period for the stock. In contrast, the Trefis High Quality Portfolio, which includes 30 stocks, has consistently outperformed the S&P 500 over the same period. The uncertain macroeconomic environment, marked by high oil prices and elevated interest rates, raises questions about NEM’s future performance compared to the broader market.
The long-term sentiment toward precious metals remains positive, with central banks diversifying their reserves by investing in gold. Newmont’s production outlook is favorable, with a significant increase in mineral reserves post the Newcrest acquisition. The company’s copper production is also expected to grow, supporting the fast-growing green energy economy. These factors, coupled with favorable production outlooks and cost efficiencies, bode well for Newmont’s future cash flows and profitability.
Trefis analysts have a price estimate of $46 for Newmont stock, in line with the current market price. The valuation takes into account the company’s production outlook, cost reduction efforts, and potential for increased cash flows from the Newcrest acquisition. Investors are advised to keep an eye on Newmont’s performance in the coming quarters, as the company navigates challenges in the market and capitalizes on opportunities in the precious metals sector.
As gold prices continue to rise and the demand for precious metals remains strong, Newmont’s position as a leading gold miner puts it in a favorable position to capitalize on market trends. The company’s strategic acquisitions, cost reduction efforts, and production outlook support its long-term growth prospects. Investors looking for exposure to the precious metals sector may find Newmont to be a solid investment option, with the potential for future returns as the company leverages its strengths and adapts to market dynamics.
