Newmont Stock Pops 34% in 6 Months: Is it Still a Screaming Buy?

Newmont Corporation’s NEM shares have shot up 33.6% in the past six months, outperforming the Zacks Mining – Gold industry’s rise of 16.6%. A surge in gold prices driven by monetary policy easing and heightened geopolitical tensions has contributed to the run-up in NEM’s shares.

The stock is currently trading at a roughly 6% discount to its 52-week high of $56.30, reached on Sept. 25, 2024. 

Technical indicators show that NEM has been trading above the 50-day simple moving average (SMA) since July 3, 2024. Following the golden crossover on May 13, 2024, the 50-day SMA continues to read higher than the 200-day moving average, manifesting a bullish trend, with the 200-day SMA acting as the support level.

NEM Stock Trades Above 50-Day SMA

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Is the time right to buy NEM’s shares for potential upside? Let’s take a look at the stock’s fundamentals.

Key Projects & Newcrest Buyout to Catalyze NEM’s Growth

Newmont continues to invest in growth projects in a calculated manner. The company is pursuing several projects, including Tanami Expansion 2 in Australia, the Ahafo North expansion in Ghana and Cadia Block Caves in Australia. These projects should expand production capacity and extend mine life, driving revenues and profits.

The acquisition of Newcrest Mining Limited has also created an industry-leading portfolio with a multi-decade gold and copper production profile in the most favorable mining jurisdictions globally. The combination of Newmont and Newcrest is expected to deliver significant value for shareholders and generate meaningful synergies, with $500 million in total annual pre-tax benefits expected by the end of 2025.

Solid Financial Health Supports NEM’s Capital Allocation

Newmont has a strong liquidity position and generates substantial cash flows, which allows it to fund its growth projects, meet short-term debt obligations and drive shareholder value. At the end of the second quarter of 2024, Newmont had liquidity of $6.8 billion, including cash and cash equivalents of around $2.6 billion. Its operating cash flow more than doubled year over year to around $1.4 billion. NEM also generated $594 million in free cash flow and returned roughly $539 million to its shareholders through dividends and share buybacks in the quarter. 

NEM offers a dividend yield of 1.9% at the current stock price. Its payout ratio is 47% (a ratio below 60% is a good indicator that the dividend will be sustainable), with a five-year annualized dividend growth rate of 6.8%. Backed by strong cash flows and sound financial health, the company's dividend is perceived to be safe and reliable.

Soaring Gold Prices to Drive NEM’s Profitability

As a leading gold producer, Newmont stands to benefit significantly from the record-setting upswing in gold prices, which should boost its profitability and drive cash flow generation. Gold prices are hitting record highs this year, and the yellow metal has been among the best-performing assets. The recent rally in gold prices has been driven by the 50-basis-point cut in interest rates by the U.S. Federal Reserve. Gold scaled a record high of $2,685.42 per ounce on Sept. 26, 2024, on the U.S. interest rate cut and growing expectations of another reduction in November, which have weighed on the U.S. dollar. Increased tensions in the Middle East arising from the Israel and Hezbollah conflict also fueled safe-haven demand. Iran’s recent missile attack on Israel has raised risks of a wider conflict in the Middle East. 

Newmont’s Earnings Estimates Shooting Higher

Earnings estimates for NEM have been rising over the past 60 days, reflecting analysts’ optimism. The Zacks Consensus Estimate for 2024 and 2025 have been revised upward over the same time frame. 
 
The Zacks Consensus Estimate for 2024 earnings is currently pegged at $3.00, reflecting an expected year-over-year growth of 86.3%. Earnings are expected to register a roughly 18.4% growth in 2025. NEM has a long-term EPS growth rate of 39.3% versus 25.5% for its industry.

Find the latest earnings estimates and surprises on Zacks Earnings Calendar.

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NEM’s Stock Valuation: A Bit Stretched But Reasonable

Newmont is currently trading at a forward 12-month earnings multiple of 15.46X, a roughly 2.9% premium to the industry average of 15.03X. The valuation looks reasonable, considering the company’s healthy earnings trajectory.

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Newmont Stock Outperforms S&P 500

Thanks to the rally in gold prices, NEM’s shares have racked up a gain of 40.8% over the past year, underperforming the industry’s 45.9% rise but topping the S&P 500’s rise of 32.4%. Its gold mining peers, Barrick Gold Corporation GOLD, Agnico Eagle Mines Limited AEM and Kinross Gold Corporation KGC, have rallied 33.9%, 68.8% and 97.3%, respectively, over the same period.

NEM’s One-year Stock Price Performance   

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Is NEM Stock Still Worth Buying?

NEM presents an attractive investment case backed by a robust portfolio of growth projects, solid financial health and bullish technicals. Other positives include a healthy growth trajectory, rising earnings estimates and an attractive dividend yield. Rallying gold prices should also boost NEM’s profitability and drive cash flow generation. With a positive earnings outlook, Newmont looks poised to deliver attractive returns to investors, making this Zacks Rank #2 (Buy) stock a prudent choice to bet on for those looking to capitalize on the gold rush. 


You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
 

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