Newmont Gains 28% YTD: How Should Investors Play the Stock?

Newmont Corporation’s NEM shares have rallied 28.3% year to date, thanks to skyrocketing gold prices driven by the intense tariff war, global uncertainties and geopolitical tensions. NEM stock has, however, underperformed the Zacks Mining – Gold industry’s 32.9% rise.Technical indicators for NEM show bullish momentum. NEM eclipsed its 50-day simple moving average (SMA) on March 11, 2025. The stock also broke out above its 200-day SMA on March 14, 2025.   NEM Stock Trades Above 50-Day SMA Image Source: Zacks Investment ResearchLet’s take a look at NEM’s fundamentals to better analyze how to play the stock.Sound 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 2024, Newmont had liquidity of $7.7 billion, including cash and cash equivalents of around $3.6 billion. It generated a strong operating cash flow from continuing operations of $6.3 billion in 2024, climbing from around $2.8 billion in 2023. Its operating cash flow soared four-fold year over year to around $2.5 billion in the fourth quarter of 2024. Free cash flow for 2024 was $2.9 billion, including a record $1.6 billion in the fourth quarter. NEM also delivered $1.1 billion to its shareholders through dividends and repurchased shares worth $1.2 billion under its $3 billion total share repurchase program in 2024.Newmont stands to benefit from the strength in gold prices, which should drive its profitability and cash flow generation. Gold prices rallied roughly 27% last year, driven by strong demand from central banks, monetary easing in the United States, global uncertainties and a surge in safe-haven demand thanks to increased tensions in the Middle East and Russia. Gold prices are shooting up this year as the worries over the global trade war have boosted safe-haven demand for bullion. Prices hit a record high of $3,057 per ounce yesterday amid interest rate cut expectations, a weaker dollar and an escalation in Middle East tension, and are already up roughly 16% this year. Gold prices will likely continue gaining support in an uncertain global environment triggered by the tariff war. Expectations of increased purchases by central banks, hopes of interest rate cuts and increased tensions in the Middle East triggered by Israeli air strikes on Gaza are other factors likely to help the yellow metal sustain the rally.  NEM offers a dividend yield of 2.1% at the current stock price. Its payout ratio is 29% (a ratio below 60% is a good indicator that the dividend will be sustainable). Backed by strong cash flows and sound financial health, the company's dividend is perceived as safe and reliable. Key Projects & Newcrest Buyout to Aid NEM’s GrowthNewmont 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 Panel 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 its shareholders and generate meaningful synergies. NEM has achieved $500 million in annual run-rate synergies following the Newcrest buyout. Newmont also remains committed to divesting non-core businesses as it shifts its strategic focus to Tier 1 assets. NEM’s attributable gold production rose around 9% year over year in the fourth quarter on strong performance from its managed Tier 1 portfolio. The company, earlier this month, completed the divestment of three non-core assets — the Musselwhite and Eleonore operations in Canada and the Cripple Creek & Victor ("CC&V") operation in Colorado. The sale of these three additional non-core assets resulted in total after-tax cash proceeds of $1.7 billion before closing adjustments.  Total gross proceeds from disclosed divestitures are expected to reach $4.3 billion, including $3.8 billion from non-core divestitures and $527 million from the sale of other investments. Newmont looks to complete the sale of its Akyem operation in Ghana and its Porcupine operation in Canada in the first half of 2025. Higher Costs Weigh on NEM StockNewmont is being challenged by higher production costs, which will likely weigh on its margins over the near term. Its gold costs applicable to sales (CAS) rose roughly 7% year over year in 2024. Newmont also saw a 5% increase in all-in-sustaining costs (AISC) — the most important cost metric of miners. It also saw higher year-over-year CAS in the fourth quarter of 2024. Newmont expects gold AISC for the total portfolio to be $1,630 per ounce in 2025, reflecting a rise from $1,516 per ounce in 2024.  The impacts of increased direct operating costs are leading to cost inflation. Higher materials, labor and contract services costs, despite somewhat easing lately, remain concerns. The company, in particular, is stung by higher labor costs, which constitute about half of its direct costs. NEM is seeing higher general and administrative (G&A) expenses, which climbed about 48% year over year in 2024. Newmont expects a rise in G&A expenses in 2025 as it continues the rationalization of portfolio and integration work after the Newcrest acquisition. The company expects G&A expenses of $475 million in 2025, an increase from $442 million in 2024. NEM’s Falling Earnings Estimates Reflect Negative Sentiment Newmont’s earnings estimates for 2025 have been going down over the past 60 days. The Zacks Consensus Estimate for first-quarter 2025 has also been revised lower over the same time frame.  Find the latest earnings estimates and surprises on Zacks Earnings Calendar. Image Source: Zacks Investment ResearchValuation Looks Attractive for NEM StockNEM is currently trading at a forward 12-month earnings multiple of 14.88X, lower than its five-year median. This represents a roughly 8% discount when stacked up with the industry average of 16.18X. Image Source: Zacks Investment ResearchNewmont Stock Outperforms S&P 500Thanks to the rally in gold prices, NEM’s shares have racked up a gain of 41.4% over the past year, underperforming the industry’s 50% increase but topping the S&P 500’s rise of 8.9%. Among its gold mining peers, Barrick Gold Corporation GOLD, Agnico Eagle Mines Limited AEM and Kinross Gold Corporation KGC have rallied 24.2%, 89.5% and 118.1%, respectively, over the same period. NEM’s One-year Price Performance   Image Source: Zacks Investment ResearchWhat Should You Do With NEM Stock?While NEM’s robust portfolio of growth projects, strong performance of its Tier 1 assets and solid financial health bode well, it remains hamstrung by higher production costs. Declining earnings estimates, partly due to the concerns over elevated costs, also cast a shadow over the company's prospects. While NEM is currently trading cheaper than its industry, it is not advisable to buy this Zacks Rank #4 (Sell) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Only $1 to See All Zacks' Buys and SellsWe're not kidding.Several years ago, we shocked our members by offering them 30-day access to all our picks for the total sum of only $1. No obligation to spend another cent.Thousands have taken advantage of this opportunity. Thousands did not - they thought there must be a catch. Yes, we do have a reason. We want you to get acquainted with our portfolio services like Surprise Trader, Stocks Under $10, Technology Innovators,and more, that closed 256 positions with double- and triple-digit gains in 2024 alone.See Stocks Now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Newmont Corporation (NEM): Free Stock Analysis Report Kinross Gold Corporation (KGC): Free Stock Analysis Report Agnico Eagle Mines Limited (AEM): Free Stock Analysis Report Barrick Gold Corporation (GOLD): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks