Newmont Mining downgraded at Deutsche Bank

Analysts foresee no more than an 8% upside in the market value of the gold stock but I see some catalysts to watch in 2018

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Shares of Newmont Mining Corporation (NEM, Financial) fell 1.1% over the last two trading days following Deutsche Bank’s downgrade.

According to an analyst research note dispatched on Tuesday, shares of Newmont Mining Corporation have been downgraded from "buy" to "hold."

Early Thursday, the gold stock was trading at $39.45 per share on the New York Stock Exchange with a market capitalization of $21.04 billion. For the 52 weeks ending Jan. 17, Newmont Mining Corp climbed 11.9% and outperformed the VanEck Vectors Gold Miners ETF (GDX, Financial) by nearly 8%, according to this chart by Yahoo Finance.

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Source: Yahoo Finance

Newmont Mining Corp’s share price is near the 52-week high of $40.25 per share. The 52-weeks low is $31.42 per share. The price-book (P/B) ratio is 1.82 versus an industry average of 2.01 and the EV-to-EBITDA ratio is 15.36 versus an industry median of 10.14.

Deutsche Bank’s action is the third downgrade for Newmont Mining Corp in a year and it is pre-dated by the Argus’ upgrade (hold to buy), which was released by the analyst on July 27.

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Source: Yahoo Finance

Over the same time span, Newmont Mining Corp received two additional downgrades from RBC Capital (sector perform) on March 16. 2017 and from Scotiabank (sector perform) on Jan. 10, 2017.

On Jun. 15, 2017, Raymond James started covering the performance of the biggest producer of gold in the U.S. with an "outperform" rating.

Newmont Mining Corp has a recommendation rating of 2.3 out of 5 and an average target price of $42.59 per share. That represents a 7.96% increase from the current market valuation.

Catalysts to watch in 2018 include projections for a higher production of gold. The Canadian miner has revised its guidance of 4.9 million to 5.4 million ounces, for lower gold costs applicable to sales of $725 per ounce and for an additional 50% increase in the dividend. The increase in the quarterly dividend is highly possible since its determination is linked to the gold price that is rising. It is up $23.6 per troy ounce year to date and is on average up $34.71 per troy ounce over the last quarter of 2017. The bullion closed at $1,335.65 per troy ounce on the London market on Wednesday.

The U.S. gold producer is currently paying shareholders a quarterly dividend of 7.5 cents. This leads to a forward annual dividend of 30 cents if the quarterly distribution is held constant by Newmont Mining Corp. and to a forward yield of 0.75%.

For 2017 and its fourth quarter, analysts forecast net earnings of 38 cents per share and of $1.47 per share, backed on revenues that are expected to come in at $1.93 billion and at $7.32 billion.

Newmont Mining Corp will release more data on operational results on Feb. 22 before the market opens.

(Disclosure: I have no positions in any security mentioned in this article.)