Thirteen out of 25 large metals and mining companies missed analysts' third-quarter EPS estimates amid ongoing inflationary pressure and weak metal prices, according to S&P Global Market Intelligence data.
As market capitalizations shrank due to lower commodity prices and growing recession fears, 25 of the world's major miners with available quarterly earnings data booked average normalized EPS of $1.18, below analysts' average consensus estimate of $1.21.
Four of the five largest miners by market cap beat analysts' earning expectations: Freeport-McMoRan Inc., Southern Copper Corp., Nucor Corp. and Barrick Gold Corp.
However, Newmont Corp., the third-largest company in the analysis and the world's largest gold miner by production, reported normalized EPS of 27 cents for the third quarter, falling short of 14 analysts' forecasts of 34 cents. Net income was dragged down by lower sales volumes and weaker metal prices, especially gold, while elevated input prices and labor costs pushed up all-in sustaining costs.
Inflationary pressures had started to ease for Newmont as of early November, President and CEO Tom Palmer said on a quarterly earnings call.
"We are starting to see some relief across energy and consumable costs coming into the fourth quarter and then seeing that play out into 2023," Palmer said Nov. 1. "We're still in a very volatile world, and what may or may not play out around the world geopolitically, and the impact that has on cost is something ... we need to be very careful about."
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The largest beat was Turquoise Hill Resources Ltd., a Canadian company that controls the giant Oyu Tolgoi copper-gold mine in Mongolia. Turquoise Hill's third-quarter net income fell 16.3% year over year due to lower production and higher input costs, but normalized EPS was 64.3% higher than consensus projections.
Turquoise Hill's share price nearly doubled in the first nine months of 2022, making it the best performer among analyzed companies. The company is 50.79%-owned by Rio Tinto Group, which made an offer in March to acquire the remaining interest. Turquoise Hill's share price jumped 24% on Aug. 24 when Rio Tinto increased its offer price to C$43 per share. But the deal was terminated in November as Rio Tinto and minority shareholders failed to find common ground on the valuation.
The biggest EPS miss in the assessment was aluminum giant Alcoa Corp. The company incurred a normalized loss of 33 cents per share for the September quarter, compared to expectations for a gain of 18 cents. Alcoa said this was driven primarily by a noncash charge for pension annuitization, sharp declines in aluminum and alumina prices, and surging costs for energy and raw materials. Its share price fell 43.5% in the first three quarters of 2022.
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