Updated Aug 7 at 11:21am ET.
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The US economy lost 23,000 jobs in July, a surprise drop when analysts were expecting a gain of about 80,000. This kind of economic weakness often makes gold more attractive to people looking for a safe place to put their money, which pushed the price of the metal higher.
As the world's largest gold miner, Newmont's profits are tied directly to the price of gold. When the metal gets more expensive, the company makes more money on every ounce it pulls out of the ground without its costs changing. This macro shift is the primary reason the stock rose about 8 percent today.
Source: Bloomberg Markets and Finance
Argus Research set its price target for the stock at $110. This is lower than the $139 average target from other analysts who follow the company. While the firm's target is more conservative than its peers, it still suggests some room for the stock to rise from its current level of about $104.
Source: Argus Research
CIBC lowered its price target for the stock to $168, down from a previous target of $175. Even with this reduction, the firm remains much more positive on the company's value than the broader market, as its target sits well above the $139 average across all analysts.
This kind of adjustment often happens after a company shares its latest quarterly results and analysts update their models for future costs and production. It suggests that while the firm sees slightly less upside than before, it still believes the business is worth much more than its current trading price.
Source: CIBC
The world's largest gold miner reported adjusted earnings of $2.10 per share, topping the $2.05 analysts expected. While revenue of $6.12 billion was slightly lower than the $6.35 billion forecast, the real story was the company's ability to generate cash. It produced a record $2.2 billion in free cash flow, the cash left over after paying for all operations and equipment, even though gold prices fell about 13 percent during the quarter.
This performance shows the benefit of the company's massive scale and its focus on high-quality mines that can stay profitable when prices fluctuate. Management reaffirmed its goal to produce 5.3 million ounces of gold this year and returned $1.9 billion to shareholders through dividends and buying back its own stock. For long-term owners, the ability to generate record cash during a price correction is a strong sign that the recent merger and portfolio cleanup are working.
See the full quarter, and how our tracked metrics did
Source: 8-K filing
The company bought about 3.2 million more units of Metallic Minerals at $0.28 per unit. This was not a surprise move, but rather the company using its existing "participation rights," which are agreements that allow a large investor to maintain their ownership percentage when a smaller company issues more stock. While the dollar amount is small for a company of this size, it shows a continued interest in its partnership with Metallic Minerals. These types of investments in smaller explorers help the company keep a foot in the door for potential future mining sites without the cost of developing them alone.
Analysts lowered their price targets across the board following the company's mixed second-quarter earnings report in late July. Most analysts remain optimistic, with 28 of 37 rating the stock a buy and an average target price 23% above today's price.
Newmont has beaten earnings estimates for seven straight quarters, showing management is excellent at controlling costs and clearing the bars they set for the market.
| Expectation | |
|---|---|
| EPS | $2.08 |
| Revenue | $6.18B |
