NEW YORK (TheStreet) -- Newmont Mining (NEM) - Get Report was falling 3% to $22.70 Tuesday following statements from Barrick Gold (ABX) CEO about merger talks with the mining company, and after gold prices fell to a 15-week low.
Speaking to Bloomberg Barrick Gold CEO Jamie Sokalsky said that talks to merge with Newmont Mining are "finished." Sokalsky said Barrick is focused on working as a standalone company. Barrick is interested in cooperating with Newmont, however, where the two companies running operations near one another in an effort to cut costs.
Also affecting Newmont stock is the recent drop in gold prices. Prices for gold fell 2% to a 15-week low of $1,265.50 an ounce Tuesday despite increased violence in Ukraine. According to Forex.com that "is a telling sign that more weakness may be on the horizon" for gold prices.
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"We rate NEWMONT MINING CORP (NEM) a SELL. This is driven by a number of negative factors, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, weak operating cash flow, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Metals & Mining industry. The net income has significantly decreased by 68.2% when compared to the same quarter one year ago, falling from $314.00 million to $100.00 million.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Metals & Mining industry and the overall market, NEWMONT MINING CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has significantly decreased to $180.00 million or 58.42% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 26.91%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 63.49% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- NEWMONT MINING CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, NEWMONT MINING CORP swung to a loss, reporting -$5.06 versus $3.78 in the prior year. This year, the market expects an improvement in earnings ($0.85 versus -$5.06).
- You can view the full analysis from the report here: NEM Ratings Report
Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.