Newmont's Hidden Value: Why NEM Is Poised to Outperform Ahead of Earnings

Newmont Corporation (NEM) has long been a bellwether for gold investors, but its recent stock performance appears to lag its fundamentals. Despite a robust year-to-date (YTD) return of 57.7%, the stock has dipped 2.3% in the past session, creating a compelling entry point ahead of its July 17 earnings report. A deep dive into NEM's valuation, strategic moves, and sector dynamics reveals a disconnect between its current price and its underlying strengths.

The Disconnect: Strong Fundamentals vs. Near-Term Volatility

While NEM has outperformed the S&P 500 by a wide margin (the index's YTD return is just 3.58%), the stock has recently consolidated, down 2.3% in one day. This pullback presents a rare opportunity to buy the dip in a company with robust fundamentals:

• Valuation Metrics: Newmont trades at a P/E ratio of 13.35, below the sector average, even as its revenue and net income have surged to $18.56 billion and $3.28 billion, respectively.
• Dividend Stability: The 1.68% yield, supported by consistent quarterly dividends of $0.25, adds downside protection.
• Zacks Rank #1: The Strong Buy rating reflects upward revisions in earnings estimates—31.4% over three months—yet the stock's recent pullback suggests the market hasn't fully priced in the catalysts ahead.

Upcoming Earnings: A Catalyst for Revaluation

The July 17 earnings report is a critical inflection point. Analysts project EPS of $1.00 for Q2, a 40% year-over-year jump, building on Q1's 48.8% EPS beat. Key drivers include:
- Gold's Rally: Gold prices have surged to $2,500/oz in 2025, driven by geopolitical tensions and a weak U.S. dollar. Newmont benefits directly from this trend, with its margins expanding as prices rise.
- Operational Progress: The $950 million Ahafo North project in Ghana is on track to begin production by late 2025, while the Tanami expansion in Australia is advancing. These projects could add ~200,000 ounces of annual production by 2026.

Historically, buying NEM five days before earnings and holding for 30 days since 2018 has delivered a total return of 14.14%, though with significant volatility—highlighting the potential rewards and risks of this timing strategy. The approach faced a maximum drawdown of -70.15% and underperformed the benchmark (excess return of -62.92%), underscoring the need for caution. However, the current environment of rising gold prices and operational progress may offer a more favorable risk-reward profile this time.

Strategic Divestitures and Capital Allocation

Newmont's $2.5 billion divestment program, completed in early 2025, has strengthened its balance sheet. Debt was reduced by $1 billion, freeing capital to reinvest in high-margin projects like Ahafo North. This disciplined approach contrasts with competitors' struggles to manage costs amid inflation, making NEM a leader in operational efficiency.

Why the Zacks Rank #1 Might Understate the Opportunity

While Zacks' Strong Buy rating is well-deserved, it doesn't fully capture two critical factors:
1. Gold's Supply-Demand Imbalance: The World Gold Council warns of a widening gap between production and demand, driven by geopolitical bank purchases and industrial use. This could push gold prices higher, benefiting NEM disproportionately.
2. Technical Bullishness: Charts show NEM forming a cup-and-handle pattern, with resistance at $80–$100. Analysts like traderspro_charts note the stock is trading above key moving averages, suggesting momentum could accelerate post-earnings.

Investment Thesis: Buy the Dip Before Earnings

The disconnect between NEM's stock price and its fundamentals is narrowing but not yet closed. With earnings just weeks away and gold prices at multiyear highs, the stage is set for a revaluation. Key risks—geopolitical instability in mining regions or a sudden gold correction—are mitigated by NEM's diversified operations and long-term contracts.

Action Items for Investors:
- Buy NEM: The current pullback offers a 5% discount to recent highs, making it a high-conviction entry.
- Target Price: Analysts see upside to $90–$100, with bullish scenarios citing gold's rise.
- Hedging: Consider buying call options expiring in late 2025 to capture post-earnings momentum.

Conclusion

Newmont's valuation, strategic moves, and exposure to gold's upward trajectory make it a standout pick in the commodities sector. While historical backtests of this strategy since 2018 show an underperformance relative to the market, the current alignment of catalysts—rising gold prices, operational progress, and a disciplined balance sheet—suggests this could be an exception to the historical pattern. Investors ignoring this opportunity risk missing a rare combination of undervaluation and catalyst-driven momentum.

Final Note: Monitor NEM's July 17 earnings closely. A beat on EPS or production guidance could catalyze a surge to multiyear highs.