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Here's Why You Should Invest in Newmont (NEM) Stock Now

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Newmont Corporation (NEM - Free Report) stock looks promising at the moment. The company’s shares have rallied more than 30% in the past year.

We are positive regarding the company’s prospects and believe that the time is right for you to add the stock to portfolio as it looks promising and is poised to carry the momentum ahead.

Let's see what makes this gold mining company a compelling investment option at the moment.

An Outperformer

Newmont has significantly outperformed the industry it belongs to in the past year. The company’s shares have gained 33% against a 28.5% decline recorded by the industry. The company also outpaced the S&P 500’s decline of 3.3% for the same period.



Solid Q4 Results 

Newmont reported net income from continuing operations of $537 million or 66 cents per share in fourth-quarter 2019 against a net loss of $3 million or breakeven per share in the year-ago quarter.

Adjusted earnings per share of 50 cents also beat the Zacks Consensus Estimate of 48 cents.

The company’s total revenues also increased around 45% year over year to $2,967 million in the last reported quarter.

Newmont expects attributable gold production for 2020 to be 6.4 million ounces, up from 6.3 million ounces recorded in 2019.

Growth Projects to Boost Production

Newmont is pursuing a number of projects including Tanami Expansion in Australia along with Subika Underground and Ahafo mill expansion in Africa. Notably, the 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 driven by the successful completion of the Ahafo’s expansion projects. It will also add annual gold production of 75,000-100,000 ounces per year from 2020 to 2024.

Higher Gold Prices to Support Margins

The coronavirus crisis led to a surge in gold prices driven by the demand for safe-haven investments. Moreover, declining oil prices and geopolitical tensions are triggering safe haven demand for gold.

Notably, the company’s average realized price of gold rose 20% year over year in fourth-quarter 2019 and boosted margins. Higher gold prices are expected to continue to drive earnings in the foreseeable future amid market volatility and economic uncertainties.

Dividend Hike & Disciplined Capital Allocation Strategy

Earlier this year, the company unveiled plans to hike its quarterly dividend to 25 cents per share or an expected annual dividend of $1 per share. The latest hike, which will be effective upon the approval and declaration of its first-quarter dividend in April 2020, suggests 79% increase from 14 cents per share declared in October 2019.

The dividend hike is in line with the company’s disciplined approach to capital allocation strategy and supports its industry leading return profile.

Estimates Northbound

Earnings estimate revisions have the greatest impact on stock prices. Estimates for the first quarter and 2020 for Newmont have moved up in the past month. Over this period, the Zacks Consensus Estimate for first-quarter earnings moved up 8.5%, while the same rose 11.4% for 2020. The consensus mark for 2020 earnings is currently pegged at $2.24 per share, which suggests year-over-year growth of 69.7%.

 

Zacks Rank & Other Key Picks

Newmont currently sports a Zacks Rank #1 (Strong Buy).

Few other top-ranked stocks in the basic materials space are Daqo New Energy Corp (DQ - Free Report) , Novagold Resources Inc. (NG - Free Report) and Impala Platinum Holdings Limited (IMPUY - Free Report) , each currently sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Daqo New Energy has an expected earnings growth rate of 353.7% for fiscal 2020. The company’s shares have surged 57.2% in the past year.

Novagold has an expected earnings growth rate of 11.1% for fiscal 2020. Its shares have returned 54.4% in the past year.   

Impala Platinum has an expected earnings growth rate of 424.1% for fiscal 2020. The company’s shares have surged 30% in the past year.

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