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Why Is Newmont (NEM) Down 6% Since the Last Earnings Report?

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A month has gone by since the last earnings report for Newmont Mining Corporation (NEM - Free Report) . Shares have lost about 6% in that time frame, underperforming the market.

Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Newmont's Earnings & Revenues Miss Estimates in Q4

Newmont posted net loss from continuing operations (as reported) of $391 million or $0.73 per share in fourth-quarter 2016. Losses widened 41.7% from $276 million or $0.54 per share recorded a year ago. The company recorded a non-cash impairment charge of $970 million in the quarter associated with the closure of its Yanacocha gold mine in Peru.

Baring one-time items, adjusted earnings were $0.33 per share for the quarter, missing the Zacks Consensus Estimate of $0.39.

Newmont's revenues of $1,789 million for the quarter jumped 23.2% from $1,452 million in the year-ago quarter owing to higher gold sales and improved pricing. However, revenues missed the Zacks Consensus Estimate of $1,807 million.

In fourth-quarter 2016, average net realized gold price was $1,193 per ounce, reflecting a year-over-year increase of 9.1%. The average net realized copper price was $2.49 per pound, representing a year-over-year increase of 29%.

Newmont's attributable gold production increased 17.2% year over year to 1.32 million ounces in the quarter. The increase can be attributed to production at Merian, Long Canyon and Cripple Creek & Victor offsetting grade reduction at Yanacocha. Attributable copper production of 13,000 tons in the quarter remained mostly unchanged year over year.

Costs applicable to sales (CAS) were $681 per ounce for gold in the quarter, declining 5.4% year over year. Copper CAS in the reported quarter was $1.88 per pound, an increase of 11.2% year over year. Lower-cost ounces from Long Canyon, Merian and Cripple Creek & Victor coupled with favorable oil prices and exchange rates offset reduced grades and higher non-cash inventory costs at Yanacocha and Ahafo.

AISC of $918 per ounce for gold fell roughly 11.4% year over year while $2.31 per pound for copper was up almost 11% year over year. Gold AISC improved over the prior-year period due to lower sustaining capital and advanced projects spend.

Regional Performance

North America

Attributable gold production in North America in the fourth quarter was 551,000 ounces, rising 29% year over year. Consolidated copper production was at 4,000 tons, down from the 5,000 tons figure recorded in the year-ago quarter.

Gold CAS for the region was $721 per ounce, down 12.4%, and copper CAS was $2.44 per pound, increasing 14%.

South America

Attributable gold production in South America was 166,000 ounces, climbing 53.7% year over year. Gold CAS for this region declined 12% year over year to $631 per ounce.

Asia Pacific

Attributable gold and copper production in the Asia Pacific region was 396,000 ounces, inching up 0.7% year over year, and 9,000 tons, on par with the year-ago quarter, respectively. Gold and copper CAS for this region was $642 per ounce, down 4.6%, and $1.68 per pound, up 6.3%, respectively.

Africa

The region produced 210,000 ounces of gold in the reported quarter, up 4.5% year over year. Gold CAS was $768 per ounce increasing 32.6% year over year.

Financial Position

Net cash provided by continuing operating activities was $590 million in the fourth quarter, compared with $284 million in the prior-year quarter mainly due to increased sales and improved gold pricing.

Long-term debt reduced to $4,049 million, down 30.8% from $5,854 million a year ago.

Outlook

Newmont anticipates attributable gold production to be in the range of 4.9–5.4 million ounces in 2017. Production at Merian and Long Canyon is anticipated to compensate the impact of declines at Twin Creeks and Yanacocha.

Attributable copper production is forecast between 40,000–60,000 tons in 2017.

Gold CAS is expected to be between $700 and $750 per ounce in 2017. The company expects CAS to improve to $650 and $750 per ounce over the longer term. AISC is forecast to be between $940 and $1,000 per ounce in 2017.

Copper CAS is estimated in the range of $1.45–$1.65 per pound in 2017. AISC is expected to be between $1.85 and $2.05 per pound in 2017.

Over the longer term, Copper CAS is expected to be between $1.5 and $1.9 per pound, and copper AISC is expected to be between $1.85 and $2.25 per pound, below the previous guidance due to a shift in allocation of costs between copper and gold.

Capital spending for 2017 is expected in the range of $800–$900 million. This includes sustaining capital expenditure of between $600 million and $700 million, represents a 24% reduction from previous guidance due to cost savings and deferrals.

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed a downward trend in fresh estimates. There has been one revision higher for the current quarter compared to two lower. In the past month, the consensus estimate has shifted lower by 28.91% due to these changes.

VGM Scores

At this time, Newmont's stock has a nice Growth Score of 'B', a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of 'C' on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of 'B'. If you aren't focused on one strategy, this score is the one you should be interested in.

Based on our scores, the stock is more suitable for growth and momentum investors than value investors.

Outlook

Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift.  Interestingly, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.


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