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Newmont (NEM) Shares Up 35% YTD: What's Driving The Stock?

Zacks Equity Research

Shares of Newmont Corporation NEM have rallied 35.2% year to date. The stock has also outperformed the industry’s decline of 10% and the S&P 500’s fall of 7% over the same period.



Newmont has a market cap of roughly $47.1 billion. Average volume of shares traded in the past three months was around 9,853.3K. The company has an expected earnings per share growth rate of 82.6% for 2020.

Let’s discuss the factors that are driving the stock.

Driving Factors

Newmont’s focus on key growth projects, disciplined capital allocation strategy as well as higher gold prices are contributing to the rally in its share price.

Newmont is pursuing a number of projects, including Tanami Expansion in Australia as well as Subika Underground and Ahafo mill expansion in Africa. The company’s Africa operations witnessed 1.1 million ounces of attributable gold production in 2019 at an all-in sustaining cost of less than $800 per ounce. This was mainly driven by the successful completion of Ahafo’s expansion projects. It is also expected to add annual gold production of 75,000-100,000 ounces per year from 2020 to 2024.

In the first quarter, the company successfully completed the sale of its Ontario, Canada-based Red Lake complex to Evolution Mining Limited for cash proceeds of $375 million. The transaction provided Newmont with an exposure to future exploration opportunities while focusing on its globally diversified portfolio of 12 managed operations and two joint ventures, including 8 world-class assets.

The divestment of assets is likely to support Newmont’s capital allocation priorities. This is also expected to strengthen the company’s investment-grade balance sheet and enable investment in highest-return projects along with returning excess cash to shareholders.

Moreover, the coronavirus pandemic has led to a surge in gold prices, driven by higher demand for safe-haven investments. Further, a slump in oil prices and geopolitical tensions have triggered demand for gold. Concerns over coronavirus’ impact on the global economy is likely to keep supporting the bullion moving ahead.

Meanwhile, the company’s average realized price of gold rose 22% year over year in first-quarter 2020 and boosted margins. Higher gold prices are expected to continue driving earnings in the near term amid market volatility and economic uncertainties.

Newmont Corporation Price and Consensus

Newmont Corporation Price and Consensus

Newmont Corporation price-consensus-chart | Newmont Corporation Quote

Zacks Rank & Other Key Picks

Newmont currently carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the basic materials space are Agnico Eagle Mines Limited AEM, Royal Gold, Inc. RGLD and The Scotts Miracle-Gro Company SMG. While Agnico Eagle sports a Zacks Rank #1 (Strong Buy), Royal Gold and Scotts Miracle-Gro carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Agnico Eagle has an expected earnings growth rate of 75.3% for 2020. The company’s shares have surged 53.2% in the past year.

Royal Gold has an expected earnings growth rate of 67.6% for fiscal 2020. Its shares have returned 56.5% in the past year.    

Scotts Miracle-Gro has an expected earnings growth rate of 17.7% for fiscal 2020. The company’s shares have surged 87.9% in the past year.

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