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Newmont Mining (NEM) Up 6.3% Since Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Newmont Mining Corporation (NEM - Free Report) . Shares have added about 6.3% in that time frame, outperforming the market.

Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? 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 drivers.

Newmont Beats Earnings and Revenue Estimates in Q2

Newmont posted net income from continuing operations of $192 million or $0.36 per share in second-quarter 2017, up from $14 million or $0.02 a share a year ago.

Barring one-time items, adjusted earnings were $0.46 per share for the quarter, outstripping the Zacks Consensus Estimate of $0.28.

Newmont's revenues of $1,875 million were up 12% from the year-ago quarter due to higher sales volume. The figure beat the Zacks Consensus Estimate of $1,786.8 million.

In the reported quarter, average net realized gold price decreased to $1,250 per ounce from $1,257 an ounce a year ago. The average net realized copper price rose to $2.46 per pound from $2.00 per pound a year ago.

Newmont's attributable gold production increased 13% year over year to 1.4 million ounces in the quarter. The increase can be attributed to production from Long Canyon and Merian, offsetting lower grades at Yanacocha and Tanami.

Newmont’s gold costs applicable to sales (CAS) was $644 per ounce for gold in the quarter, almost remained unchanged from year-ago quarter of $661. Copper CAS in the reported quarter was $1.38 per pound, an increase of 27% year over year, on the back of full potential improvements, higher sales volumes and lower co-product allocation of costs to copper.

AISC of $884 per ounce for gold fell roughly 3.2% year over year while $1.69 per pound for copper was down almost 22% year over year on improved unit CAS.
 
Regional Performance

North America


Attributable gold production in North America in the second quarter was 578,000 ounces, rising 21% year over year. Consolidated copper production was at 5,000 tons, unchanged figure recorded in the year-ago quarter.

Gold CAS for the region was $628 per ounce, down 10% year over year, and copper CAS was $1.60 per pound, declining 21% year over year.

South America

Attributable gold production in South America was 153,000 ounces, surging 89% year over year. Gold CAS for this region rose 7% year over year to $825 per ounce.

Australia

Attributable gold and copper production in the region was 401,000 ounces, declining 7% year over year. Gold and copper CAS for this region was $652 per ounce, up 5%, and $1.27 per pound, down 31%, respectively.

Africa

The region produced 220,000 ounces of gold in the reported quarter, up 7% year over year. Gold CAS was $605 per ounce, increasing 8% year over year.

Financial Position

Net cash provided by continuing operating activities declined 21% year over year to $529 million in the second quarter, mainly due to working capital changes. The company ended the quarter with $3.1 billion cash in hand.

The company reduced net debt by over 70% to $1.5 billion.

Outlook

Newmont revised its guidance of attributable gold production to the range of 5-5.4 million ounces for 2017 (up from 4.9-5.4 million ounces). Production at Long Canyon and Merian is anticipated to compensate the impact of declines at Yanacocha and Twin Creeks.

The company kept attributable copper production forecast for 2017 unchanged from the previous guidance of 40,000-60,000 tons per year.

The company revised its AISC guidance for 2017 and it now expects it to be between $900 and $950 per ounce (down from $940 and $1,000 per ounce expected earlier).

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 between $1.5 and $1.9 per pound, and copper AISC is expected to be between $1.85 and $2.25 per pound.

Newmont has revised downward its capital spending guidance for 2017 to the range of $890 million-$990 million (down from $900 million-$1.1 billion). This includes sustaining capital expenditure of between $575 million and $675 million (down from $600 million and $700 million expected earlier).

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed a downward trend in fresh estimates. There has been two revisions lower for the current quarter.

Newmont Mining Corporation Price and Consensus

 

VGM Scores

At this time, the stock has an average Growth Score of C, however its Momentum is doing a lot better with a A. 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 momentum investors than those looking for value and growth.

Outlook

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




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