What's in the Cards for Newmont (NEM) This Earnings Season?

Gold miner Newmont Mining Corporation NEM is scheduled to report fourth-quarter 2017 results before the opening bell on Feb 22.

Last quarter, the company delivered a positive earnings surprise of 12.9%. Its adjusted earnings of 35 cents per share beat the Zacks Consensus Estimate of 31 cents. Newmont has surpassed expectations in three of the trailing four quarters while missing in one, with an average positive surprise of 17.6%.

Can the company surprise investors again or is it heading for a possible pullback? Let’s see how things are shaping up for this announcement.

Newmont Mining Corporation Price and EPS Surprise

Newmont Mining Corporation Price and EPS Surprise | Newmont Mining Corporation Quote

Factors to Consider

Newmont expects attributable gold production in the range of 5-5.4 million ounces for 2017. The projection factors in full potential improvements in Africa and North America. On a year-over-year basis, production at Long Canyon and Merian is anticipated to compensate the impact of declines at Yanacocha and Twin Creeks.

Its AISC (all-in sustaining costs) guidance for 2017 also remains unchanged at between $900 and $950 per ounce, as it expects reduction of sustaining capital in Africa, North America and Australia.

The company also kept attributable copper production forecast for 2017 unchanged from the previous guidance of 40,000-60,000 tons per year, including Phoenix and Boddington. Copper AISC is expected to be between $1.85 and $2.05 per pound in 2017.

Newmont’s total revenues for the fourth quarter are projected to increase 4.2% sequentially, as the Zacks Consensus Estimate for the quarter is currently pegged at $1,958 million. Notably, the projected figure marks 9.4% year-over-year increase from $1,789 million recorded a year ago.   

Strong production performance in the company’s North American operation is expected to continue in the fourth quarter. In the third quarter, North America’s attributable gold production rose 6% year over year, while gold costs applicable to sales (CAS) increased 9%. The company expects North American operations to produce 2.1-2.2 million ounces for 2017.

Attributable gold production in South America also surged 125% year over year last quarter while gold CAS fell 21% to $806 per ounce. The company expects the region to produce 630,000-690,000 ounces in 2017.

Notably, attributable gold production in Australia and Africa were both down 5% year over year in the third quarter. While the gold CAS for Australia increased 12%, the same decreased 17% for the African operations. The company expects Australia production in the range of 1.5-1.7 million ounces and Africa production to be between 775,000 and 835,000 ounces in 2017.

Newmont is making notable progress with its growth projects. We are also impressed with its efforts to reduce debt and improve efficiency. The company reduced its net debt to $1.1 billion at the end of the third quarter.

Moreover, the acquisition of CC&V represents a significant opportunity and the company expects gold production from CC&V to be between 420,000 and 470,000 ounces in 2017, at AISC in the range of $680-$730.

Shares of Newmont have moved up 7.5% in the past three months, outperforming the 2.9% decline recorded by its industry.

 

Earnings Whispers

Our proven model does not conclusively show that Newmont is likely to beat the Zacks Consensus Estimate this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below:

Zacks ESP: Earnings ESP for Newmont for the fourth quarter is -5.94%. This is because the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 38 cents and 40 cents, respectively. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Newmont currently carries a Zacks Rank #3, which when combined with a negative ESP, makes surprise prediction difficult.  

Note that we caution against Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks Poised to Beat Estimates

Here are some companies in the basic materials space you may want to consider as our model shows they too have the right combination of elements to post an earnings beat this quarter:

Franco-Nevada Corporation FNV has an Earnings ESP of +0.46% and sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Huntsman Corporation HUN has an Earnings ESP of +2.22% and a Zacks Rank #1.

Ferroglobe PLC GSM has an Earnings ESP of +61.77% and carries a Zacks Rank #3.

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