Newmont (NEM) To Report Q2 Earnings: What's In The Cards?

Gold miner Newmont Mining Corporation (NYSE:NEM) is scheduled to report second-quarter 2017 results before the opening bell on Jul 25.

Last quarter, the company delivered a positive earnings surprise of 8.70%. Its adjusted earnings of 25 cents per share for the quarter beat the Zacks Consensus Estimate of 23 cents. Newmont has surpassed expectations in two of the trailing four quarters, with an average positive surprise of 12.62%.

Shares of Newmont have inched up 0.6% in the past three months versus the 4% decline of its industry.

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

Earnings Whispers

Our proven model shows that Newmont is likely to beat the Zacks Consensus Estimate this quarter. This 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 is currently pegged at +21.43%. This is because the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 34 cents and 28 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 #3 which when combined with a positive ESP, makes us reasonably confident of an earnings beat. 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.

Factors to Consider

Newmont, in its first-quarter call, said that it anticipates attributable gold production in the range of 4.9–5.4 million ounces for 2017. Production at Merian and Long Canyon is anticipated to compensate the impact of declines at Twin Creeks and Yanacocha. The company has kept attributable copper production forecast for 2017 unchanged from the previous guidance of 40,000–60,000 tons.

Newmont remains focused on investing in projects, explorations and transactions which can improve the company’s resources, reserves and margin. Its effort to reduce debt will also increase efficiency and cash flows. It will also provide the company with financial flexibility to fund high margin projects. The company is making a notable progress with its growth projects including the Tanami Expansion in Australia, and Subika Underground and Ahafo mill expansion in Africa.

Newmont should also gain from its acquisition of Cripple Creek & Victor (CC&V) gold mine, which provides an opportunity for it to improve mine life. Also, the company believes that with this buyout it can add profitable gold production and save direct mining costs by up to 10% through enhanced productivity and optimization. Newmont expects gold production from CC&V to be between 400,000 and 450,000 ounces in 2017, at all-in sustaining costs (AISC) in the range of $730–$780.

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

However, Newmont is exposed to a volatile gold price environment. An expected increase in unit costs in 2017 as reflected by the company’s guidance is also a concern. While Newmont reduced its gold AISC by 2% year over year to $912 per ounce in 2016, the company expects AISC to increase this year to between $940 and $1,000 per ounce. The increase is partly due to a shift in the allocation of cost between copper and gold production and higher investment in advanced project and exploration.

Newmont Mining Corporation Price and EPS Surprise

Newmont Mining Corporation Price and EPS Surprise | Newmont Mining Corporation Quote

Stocks That Warrant a Look

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

Arconic Inc. (NYSE:ARNC) has an Earnings ESP of +11.11% and carries a Zacks Rank #3.

Agnico Eagle Mines Limited (NYSE:AEM) has an Earnings ESP of +13.33% and sports a Zacks Rank #1.

Iamgold Corporation (TO:IAG) has an Earnings ESP of +300.00% and carries a Zacks Rank #3.

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