Will Higher Gold Prices Aid Newmont's (NEM) Q3 Earnings?

Zacks Equity Research
·3 min read

Newmont Corporation NEM is scheduled to report third-quarter 2020 results on Oct 29, before the opening bell.

The company’s results are likely to have benefited from higher gold prices during the third quarter. The company has a negative earnings surprise of 4.7% on average over the trailing four quarters.  

The company’s shares have gained 55.2% in the past year compared with a 13.1% rise of the industry.

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

The Zacks Model  

Our proven model predicts an earnings beat for Newmont this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. That’s the case here.

Earnings ESP: Earnings ESP for Newmont is +1.90%. The Most Accurate Estimate and the Zacks Consensus Estimate are currently pegged at 81 cents and 79 cents, respectively. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Newmont carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Some Factors at Play in Q3

Gold has been the bright spot this year as mounting fears over the coronavirus pandemic made it the most attractive safe-haven asset. A slump in crude oil prices, a low interest rate environment and geopolitical tensions have stoked demand for gold. Concerns over supply crunch arising from suspensions of operations by miners per government mandates also contributed to the gain in gold prices. Gold prices surged past the $1,900 an ounce mark in July and even attained an all-time high of $2,089.20 an ounce on Aug 7. Meanwhile, Newmont’s averaged realize price of gold also rose 31% year over year in the second quarter. The trend likely continued in the third quarter and boosted margins.  

In August, Newmont announced that it has entered into a Strategic Alliance Agreement with Kirkland Lake Gold Ltd. KL to jointly evaluate regional exploration opportunities around the former’s Timmins properties and Kirkland Lake Gold’s Ontario, Canada-based Holt Complex.

The company stated that through this strategic alliance and the option mention earlier, it will be able to remove around $350 million liability for the Holt Royalty on its balance sheet as of Jun 30, 2020. The move will lead to a gain of around $275 million in its third-quarter results.

What do the Estimates Say?

The Zacks Consensus Estimate for third-quarter consolidated revenues for Newmont is currently pegged at $3,273 million, which calls for a rise of 20.6% year over year.

Other Stocks Likely to Beat Estimates

Here are some other companies that you may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Coeur Mining, Inc. CDE, scheduled to release third-quarter 2020 results on Oct 28, has an Earnings ESP of +28.57% and sports a Zacks Rank #2.

Pan American Silver Corp. PAAS, scheduled to release third-quarter 2020 earnings on Nov 4, has an Earnings ESP of +0.93% and carries a Zacks Rank #3.

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Newmont Corporation (NEM) : Free Stock Analysis Report
 
Coeur Mining, Inc. (CDE) : Free Stock Analysis Report
 
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Kirkland Lake Gold Ltd. (KL) : Free Stock Analysis Report
 
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