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What's in Store for Newmont (NEM) This Earnings Season?

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Gold miner Newmont Mining Corporation (NEM - Free Report) is scheduled to report third-quarter 2017 results before the opening bell on Oct 26.

Last quarter, the company delivered a positive earnings surprise of 64.3%. Its adjusted earnings of 46 cents per share for the quarter beat the Zacks Consensus Estimate of 28 cents. Newmont has surpassed expectations in two of the trailing four quarters, with an average positive surprise of 14.4%.

Shares of Newmont have moved up 11.5% in the past three months, outperforming the 5.1% growth recorded by its industry.


Let’s see how things are shaping up prior to this announcement.

Factors at Play

Newmont, in July, 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), as production at Long Canyon and Merian is expected to compensate the impact of declines at Yanacocha and Twin Creeks. However, the company kept attributable copper production forecast for 2017 unchanged from the previous guidance of 40,000-60,000 tons per year.

Newmont also revised its AISC (all-in sustaining costs) guidance for 2017 and now expects it to be between $900 and $950 per ounce (down from $940 and $1,000 per ounce expected earlier).  

In second-quarter 2017, Newmont's attributable gold production increased 13% year over year to 1.4 million ounces. The increase was due to production from Long Canyon and Merian, offsetting lower grades at Yanacocha and Tanami.

Moreover, attributable gold production for North America, South America and Africa increased year over year while the same declined for Australia.

Newmont is making notable progress with its Tanami expansion project in Australia, which is expected to improve gold production at the mine. Tanami expansion project achieved commercial production in August. The Ahafo expansion projects represents additional upside.

Moreover, the acquisition of Cripple Creek & Victor (“CC&V”) represents a significant opportunity.  The company expects gold production from CC&V to be between 420,000 ounces and 470,000 ounces in 2017, at AISC in the range of $680-$730.

Newmont is also making notable progress with its cost and efficiency improvement initiatives, which should lend support to its third quarter results. Strong operational performance is also allowing the company to generate positive free cash flow.

Earnings Whispers

Our proven model does not conclusively show that Newmont is likely to beat the Zacks Consensus Estimate this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is the case here as you will see below:

Zacks ESP: Earnings ESP for Newmont for the third quarter is -1.36%. This is because the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 30 cents and 31 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 negative ESP, makes surprise prediction difficult. You can see the complete list of today’s Zacks #1 Rank stocks here.

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

Stocks Poised to Beat Estimates

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

FMC Corporation (FMC - Free Report) has an Earnings ESP of +0.88% and sports a Zacks Rank #1. 

Air Products and Chemicals, Inc. (APD - Free Report) has an Earnings ESP of +0.34% and carries a Zacks Rank #2.

United States Steel Corporation (X - Free Report) has an Earnings ESP of +2.41% and carries a Zacks Rank #3.

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