Earnings Preview: Newmont seen benefiting from higher gold

OVERVIEW: Gold set a record high above $1,000 per ounce on March 17. The surge in gold typically seen as a defensive investment in times of economic uncertainty coincided with the failure of U.S. brokerage Bear Stearns.

The increase in gold prices boosted demand for gold-linked securities, like Newmont stock, to record levels.

Last month, the Denver-based company finished its $1.53 billion acquisition of Canada-based Miramar Mining Corp. Miramar controls a large undeveloped gold property in Canada's Nunavut Territory.

BY THE NUMBERS: Analysts surveyed by Thomson Financial expect earnings per share of 54 cents on revenue of $1.66 billion.

ANALYST TAKE: "Considering our positive multiyear gold outlook, recent share price underperformance relative to peers, and the price of gold, we see the shares as undervalued at current level," Citi analyst John H. Hill wrote in a recent note to investors. We regard Newmont as the premier gold equity for U.S. investors, in terms of liquidity and leverage to gold prices.

"The company benefits from an unhedged profile that favors maximum revenue and earnings exposure to spot gold prices," he added

WHAT'S AHEAD: Investors will watch to see if central banks continue to respond to the global credit crisis with such gold-friendly moves as liquidity injections, lowering collateral-quality, increasing money supply and a growth-over-inflation bias. Such policies favor gold.

Furthermore, investors will want to see if Newmont has been able to translate higher gold prices into significant margin improvement.

STOCK PERFORMANCE: Shares rose 17.4 percent during the quarter to $35.44. Year to date, the stock is up 50 percent. The stock finished Monday's trading at $45.08.