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What’s Driving Analysts’ Earnings Estimates for Newmont Mining?

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Factors impacting Newmont’s estimates

Newmont Mining (NEM) is one of the very few gold mining stocks to have given a flat-to-positive return this year. The company has emerged as a more operationally efficient company after its portfolio restructuring. It recorded an earnings beat in each quarter of 2017, and is among the few major gold companies to have registered production growth in 2017. Its strong project pipeline is the major driver behind its consistent-to-increasing production profile. The company recently provided its outlook, which showed that the company has solid plans to increase its production and reduce costs going forward. To learn more about its outlook, read Why Newmont Mining Stock Fell despite the 4Q17 Earnings Beat.

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Analysts’ revenue estimates

Analysts expect Newmont Mining’s revenue to rise 2.1% YoY (year-over-year) in 2018. According to the company’s guidance, its production is expected to fall 2.8% YoY at the midpoint in 2018. Analysts are expecting higher precious metal prices to drive the company’s revenue growth. Most of its near-term projects have already come into production, so it might be some time before medium-term projects start delivering, which could be why analysts expect 0.6% revenue growth in 2019 and a 5.2% revenue decline in 2020.

Earnings estimates

Newmont Mining’s (NEM) EBITDA (earnings before interest, tax, depreciation, and amortization) for 2018 are expected to fall 0.8% YoY to $2.6 billion. Newmont is expecting its production to fall and costs to rise between 2017 and 2018, driving its EBITDA lower despite higher revenue in 2018. The costs will likely come down again in 2019, as guided by the company, which is why its margins are likely to expand to 36.8% from 34.9% between 2018 and 2019.

Over the longer term, the company’s unit costs should fall as new projects with lower unit costs begin. Peers (GDX) (RING) Barrick Gold (ABX), Goldcorp (GG), Agnico Eagle Mines (AEM), and Yamana Gold (AUY) have also trimmed costs considerably over the past year.

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