Denver-based gold mining giant Newmont Mining (NEM) ended the week down 15.9%, even as gold futures (GCZ24) soared to new highs. While mining stocks often move in tandem with commodity prices, traders punished the S&P 500 Index ($SPX) component after its Q3 earnings fell short of estimates.
Despite a substantial increase in revenue and net income compared to the previous year, the company faced higher costs, particularly in labor, which impacted its profit margins. The market reacted negatively to the earnings miss, causing NEM shares to collapse by 14.7% on Thursday, with continued losses into Friday’s session - even as gold prices rose to new records to wrap up the week.
Newmont is implementing strategic initiatives like divestments of non-core assets and a share repurchase program to enhance shareholder value. However, it faces challenges from cost escalations and a slight reduction in long-term production targets, emphasizing the need for effective cost management and strategic execution.
NEM's five-year dividend growth rate in excess of 15% is notable, and it yields over 2% at current levels. The company's valuation metrics, including an EV/EBITDA ratio of 7.36 and price/cash flow of 8.32, suggest it is fairly valued compared to industry averages.
Following the ugly sell-off post-earnings, NEM is no longer technically overbought, suggesting that intrepid investors can start to buy the dip at their own risk.
Analysts rate NEM a “Moderate Buy” overall, with the mean price target of $61.17 indicating a premium of 26.3% to current prices.
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On the date of publication, Edited by Elizabeth Volk did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
