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Newmont Goldcorp Hits New 52-Week High: What's Driving It?

Zacks Equity Research

Newmont Goldcorp Corporation NEM reached a fresh 52-week high of $42.34 on Dec 24, before closing the session at $42.18.

The company has a market cap of around $35 billion. Average volume of shares traded in the past three months has been 6,205.1K.

The stock has gained 20.5% in the past year compared with the industry’s 48.9% growth.

 


Factors Driving the Rally

Healthy growth prospects, disciplined capital allocation strategy and synergies from the merger with Goldcorp are some key factors contributing to the company’s share price appreciation.

Newmont Goldcorp expects attributable gold production for 2019 to be 6.3 million ounces at an anticipated all-in sustaining costs of $965 per ounce and projected at costs applicable to sales of $715 per ounce.

Earlier this month, the company announced that its board approved the authorization of a stock repurchase program for up to $1 billion of its common shares. The repurchase is scheduled to be completed in the next 12 months. Moreover, the repurchased shares will be retired. This will lead to immediate accretion to shareholders by lowering total outstanding shares and boosting financial performance.

Last week, Newmont Goldcorp announced an agreement to divest its 50% interest in Kalgoorlie Consolidated Gold Mines (“KCGM”) to Australia-based Northern Star Resources Limited. Through this divestment, Newmont Goldcorp will receive $800 million in cash for its stake in KCGM.

Newmont Goldcorp has considerably surpassed market expectations by announcing more than $1.4 billion in fair value cash transactions over the past month. This includes the agreement to divest Red Lake in Canada for $375 million and sell its stake in Continental Gold for $260 million.

Building on the company’s $1-billion share repurchase plan, Northern Star’s all-cash offer supports Newmont Goldcorp’s disciplined capital allocation strategy. This includes strengthening investment-grade balance sheet, reinvesting in the business and returning capital to shareholders. The divestment of KCGM streamlines Newmont Goldcorp’s portfolio. The company now has 12 top-tier assets located on four continents, which have the most favorable gold mining jurisdictions.

Moreover, the company has completed its integration process with Goldcorp. It is now positioned to realize more than $500 million per year in total cash flow improvements by 2021 from supply chain efficiencies, G&A and exploration synergies along with full potential productivity and cost improvements.

Given these recent developments, Newmont Goldcorp is expected to issue an update on its earlier announced 2020 outlook and longer-term view early in 2020.

Also, earnings estimate revisions have the greatest impact on stock prices. Earnings estimates for Newmont Goldcorp for the fourth quarter have moved up in the past two months. Over this period, the Zacks Consensus Estimate for fourth-quarter earnings has increased 8.5% to 51 cents.

Newmont Goldcorp Corporation Price and Consensus

 

Newmont Goldcorp Corporation Price and Consensus

Newmont Goldcorp Corporation price-consensus-chart | Newmont Goldcorp Corporation Quote

Zacks Rank & Key Picks

Newmont Goldcorp currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the basic materials space are Impala Platinum Holdings Limited IMPUY, Pan American Silver Corp PAAS and Air Products B2Gold Corp BTG. While Impala Platinum and Pan American Silver currently sport a Zacks Rank #1 (Strong Buy), B2Gold carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Impala Platinum Holdings has projected earnings growth rate of 255.2% for fiscal 2020. The company’s shares have skyrocketed 310.7% over a year.

Pan American Silver has an estimated earnings growth rate of 56.4% for 2019. Its shares have returned 58.3% in the past year.

B2Gold has an expected earnings growth rate of 43.8% for 2019. The company’s shares have gained 31.8% in the past year.

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