On Tuesday, BofA Securities maintained its Underperform rating and $8.00 price target for Nexa Resources (NYSE:NEXA), following the company's updated 2024 guidance. The update from Nexa Resources last week revealed that despite new challenges at the Aripuanã mine and the sale of the Moro Agudo property, the overall 2024 metal production volumes are expected to remain stable. This steadiness is attributed to better-than-anticipated performance at other mining sites.
Nexa Resources reported that higher by-product prices have led to a decrease in the projected 2024 zinc unit cash costs. Additionally, the capital expenditure (capex) forecast for 2024 has been lowered. The analyst noted that after previous difficulties, the current issues at Aripuanã are a significant concern. However, the strong results from the Cerro Lindo, Vazante, and Atacocha mines were highlighted as positive developments.
Reflecting these updates, BofA Securities has adjusted its estimated earnings per share (EPS) for Nexa Resources in 2024 to $0.49, up from the previous estimate of $0.48. The adjustment comes after observing a 34% increase in Nexa Resources' share price since the low on September 6, 2024, which has paralleled a 19% rise in zinc prices since their low on October 9, 2024.
Despite the recent appreciation in Nexa's share value and its unique position as an investment option tied to zinc, BofA Securities expressed caution. The firm's cautionary stance is based on the current zinc price of $3,170 per tonne, which is 15% higher than BofA's projected price for 2025. As a result, the firm has reiterated its Underperform rating on Nexa Resources.
In other recent news, Nexa Resources reported a strong second quarter in 2024, with consolidated net revenues reaching $736 million. This marks a 27% increase from the previous quarter and a 17% rise year-over-year. The adjusted EBITDA also saw a significant increase, reaching $200 million, a 64% increase from the previous quarter and a 180% increase from the same period last year.
These positive financial results were attributed to higher metal prices, increased mining sales volumes, and improved operational performance. The company's Aripuana plant improved utilization rates and achieved positive operational cash flow in June, while the Cerro Pasco integration project is progressing, with approval expected in the coming months.
Nexa Resources also forecasts zinc prices to remain supported in the short-term due to macroeconomic factors and a tight concentrate market. The company plans to maintain CapEx around $400 million for the next year, focusing on sustaining projects, and intends to diversify into copper, seeking more stable cash flows and price resilience.
InvestingPro Insights
Recent InvestingPro data adds context to BofA Securities' analysis of Nexa Resources (NYSE:NEXA). Despite the company's challenges, InvestingPro Tips indicate that net income is expected to grow this year, and analysts predict the company will be profitable. This aligns with BofA's adjusted EPS estimate of $0.49 for 2024.
The stock's recent performance is reflected in InvestingPro data, showing a 42.13% price total return over the past year and trading near its 52-week high at 97.16% of that level. This supports BofA's observation of the 34% share price increase since September 2024.
However, investors should note that Nexa operates with a significant debt burden and has not been profitable over the last twelve months, with a P/E ratio of -4.78. The company's revenue growth has also been negative at -6.52% over the last twelve months, although quarterly revenue growth shows improvement at 17.49%.
For a more comprehensive analysis, InvestingPro offers 8 additional tips for Nexa Resources, providing deeper insights into the company's financial health and market position.
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