Investment Report: "Newmont: Redemption Has Finally Arrived"

Summary:

- Newmont Corporation (NYSE:NEM) investors faced a bitter Q4 earnings report, accompanied by a severe dividend reduction.

- Contrary to bearish expectations post-earnings in February, NEM reached a formidable bottom, offering a counter-narrative to those forecasting further decline.

- A significant surge in gold prices has propelled NEM's fortunes, signaling an upward trajectory yet to fully unfold.

- Investors who seized the opportunity to invest in NEM at its historical lows are now reaping the rewards, affirming their steadfast approach against prevailing market skepticism.

Vindication for Newmont Buyers:

Investors in Newmont Corporation, who disregarded the bleak post-Q4 earnings atmosphere, have experienced notable success. Despite a less-than-favorable earnings report and dramatic dividend slash, NEM hit a definitive bottom in late February, much to the chagrin of bearish speculators caught off-guard. An analyst downgrade from Argus at the bottom foreshadowed little hope for recovery, citing ambiguous earnings outlook and ominous technical indicators suggesting enduring bearish movement. However, this prognosis failed spectacularly as NEM outshined the S&P 500 from its February low point, marking an ascent of over 40% up to its recent highs in April 2024.

Reflecting on my previous evaluation, I elevated NEM to a Strong Buy stance before the February earnings, predicting a favorable risk/reward balance that indicated a promising technical rebound. This assessment has been borne out, with NEM's performance easily surpassing that of the S&P 500 during the same timeframe. Nonetheless, NEM's shares still appear modestly priced, albeit the reduced dividend might deter income-focused investors.

Anticipated Gold Surge in Upcoming Earnings:

With Newmont set to announce its Q1 earnings soon, the enhanced buying momentum implies market anticipation of robust operational delivery. The record-breaking gold prices have infused renewed enthusiasm into the operational leverage of mining leaders like Newmont. While initial forecasts for Newmont's production seemed grim, there is a strong outlook for production escalation to 8.3 million gold equivalent ounces by 2028, with an immediate improvement expected following 2023's production bottom of 5.5 million ounces. Yet, the All-in Sustaining Costs (AISC) reported for 2023 have soared to $1,444 per ounce, casting a shadow over cost-efficiency expectations.

The spike in oil prices also threatens to influence cost projections. However, the overall impact should be mitigated by the robust surge in gold prices, which recently breached the $2,450 mark. My bullish stance on gold, asserted initially in an early October 2023 SPDR Gold Shares ETF (GLD) piece and reiterated this January, underlined the precious metal's breakout potential – a forecast that has now materialized.

NEM Quant Grades & Analyst Outlook:

Despite my bullish gold outlook, it was initially disheartening to see minimal momentum transfer to major miners like NEM. However, as recent performances have likely factored in the recovery of gold prices, focus now pivots to Newmont's operational efficacy in 2024. Analyst projections are forecasting substantial net margin enhancements through 2025 as Newmont refines its portfolio and divests from higher-cost operations. Expected net margins could elevate to 18.6% by 2025 from 2023's 11.5%, presenting an opportunity for Newmont to boost investor confidence through meticulous execution. With a valuation below sector comparables and a forward adjusted earnings multiple significantly beneath its ten-year average, there's room for a re-rating. This positions NEM as an appealing prospect for investors who can patiently maintain their stance.

Important Reminder:

Investors should conduct their due diligence and not view this information as financial advice. Consider the insights offered as a complement to your research, and exercise independent judgment. The rating provided should not be perceived as an exact timing for investment actions.