Newmont Corporation: Analysis and Outlook

Newmont Corporation (NYSE: NEM) is a leading gold mining company with significant potential upside due to recent increases in gold prices. Despite the rise in gold prices, gold miners have not seen the same increase in their share prices, creating an opportunity for investors. This article examines Newmont’s potential for at least 24% upside at current gold prices, the upcoming Q1 2024 earnings release, and potential triggers for the company’s share price.

Q1 2024 Earnings Preview

Newmont is set to report earnings on April 25th, before the market opens. Analysts expect an EPS of $0.36, but the recent steep rise in gold prices could lead to positive surprises in earnings. Based on current gold prices, average realized prices around $2,070 per ounce, and costs attributable to sales (CAS) of $1,100 per ounce, an EPS around $0.50 is possible.

• Sales: Estimated at $3,312 million.
• CAS: Estimated at $1,760 million.
• Net Income: Estimated at $572 million.
• Shares Outstanding: Estimated at 1,153 million.
• Estimated EPS: $0.50.

These estimates suggest potential positive surprises in the upcoming earnings release.

Valuation and Sensitivity Analysis

Newmont is currently trading at a forward EV/EBITDA ratio of 6.5x, historically low for the company, as the average ratio has been around 9.5x. A sensitivity analysis reveals that Newmont’s fair value estimate for the share price is around $48.70 or approximately 24% higher than the current level, assuming a forward EV/EBITDA ratio of 8x.

• Estimated Annualized EBITDA: Around $7.8 billion.
• Net Debt: $6.4 billion.
• Fair Value Estimate: Approximately $48.70 per share.

Risks and Upside Triggers

• Gold Price Volatility: Newmont’s performance is closely tied to gold prices. Geopolitical tensions, central bank gold purchases, and economic uncertainties support gold prices, while a “higher for longer” monetary policy or resolution of geopolitical issues could impact prices negatively.
• Q1 2024 Earnings Release: The upcoming earnings release could trigger an upside if Newmont raises guidance, buyback, or dividend, given the recent significant increase in gold prices.

Conclusion

Newmont Corporation presents a compelling investment opportunity due to its current low valuation relative to historical levels and the potential for at least 24% upside at current gold prices. The upcoming Q1 2024 earnings release and potential increase in guidance could serve as triggers for an upside in Newmont’s share price. Investors may benefit from Newmont’s strategic positioning and potential for growth as the gold market continues to rise.