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Newmont (NEM) to Post Q4 Earnings: What's in the Cards?

Zacks Equity Research

Newmont Mining Corporation NEM is scheduled to report fourth-quarter 2018 results on Feb 21, before the opening bell.

In the last reported quarter, the gold miner delivered a positive earnings surprise of 50% by posting adjusted earnings of 33 cents per share. The figure beat the Zacks Consensus Estimate of 22 cents.  

Revenues fell around 8% year over year to $1,726 million. The figure missed the consensus mark of $1795.5 million.

Notably, Newmont surpassed earnings expectations in three of the trailing four quarters, the average being 16.1%.

The stock has lost 15% in the past year compared with the industry’s decline of 2.6%.

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

Earnings Whispers

Our proven model shows that Newmont is likely to beat estimates this quarter. That is because a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is the case here, as you will see below:

Earnings ESP: Earnings ESP for Newmont is +12.07%. This is because the Most Accurate Estimate and the Zacks Consensus Estimate are currently pegged at 26 cents and 23 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 #2, which when combined with a positive ESP, makes us reasonably confident of an earnings beat. You can see the complete list of today’s Zacks #1 Rank stocks here.

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

Factors at Play in Q4

In October 2018, the company narrowed attributable gold production guidance for 2018 in the range of 4.9–5.2 million ounces from the previous projection of 4.9–5.4 million ounces. Cost outlook for 2018 improved as all-in sustaining costs (AISC) is currently expected between $950 and $990 per ounce, down from the previous projection of $965-$1,025 per ounce. Costs applicable to sales (CAS) for gold is unchanged in the range of $700-$750 per ounce.  

Attributable copper production projections for 2018 was kept unchanged in the range of 40,000-60,000 tons.

Notably, total revenues for the fourth quarter is expected to decline around 4.1% year over year, as the Zacks Consensus Estimate is currently pegged at $1,856 million.

During third-quarter earnings call, the company also stated that it expects higher-grade ore from Subika open pit in the fourth quarter along with higher production. Also, Newmont expects to achieve highest production in the fourth quarter, supported by planned higher grades at Yanacocha, Leeville and Ahafo.

For 2018, the company expects total attributable production from North America in the range of 1.95-2.1 million ounces at AISC $920-$995 per ounces. The same for South America is projected at 615,000-675,000 ounces at AISC of $925-$1,025 per ounce.

Also, total attributable production at Australia and Africa are projected in the range of 1.42-1.56 million ounces and 815,000-875,000 ounces, respectively.

Newmont is likely to gain from investments in growth projects. In November 2018, the company announced commercial production at the Subika Underground project. The milestone adds lower-cost, higher-grade gold production at the Ahafo mine in Ghana. Subika Underground is the company’s third profitable expansion in 2018 along with Northwest Exodus and Twin Underground.   

Other Stocks Poised to Beat Estimates

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

Eldorado Gold Corp EGO has an Earnings ESP of +9.48% and carries a Zacks Rank #3.

First Majestic Silver Corp AG has an Earnings ESP of +7.69% and carries a Zacks Rank #3.

B2Gold Corp BTG has an Earnings ESP of +2.27% and carries a Zacks Rank #3.

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