On Thursday, BMO Capital Markets updated its view on New Gold Inc. (NYSE:NGD:CN) (NYSE: NGD), raising the price target to C$3.00 from the previous C$2.25. The firm maintained an Outperform rating on the stock. This adjustment follows New Gold's first-quarter earnings report, which revealed better-than-expected results.
New Gold reported an adjusted earnings per share (EPS) of C$0.02 for the first quarter of 2024, surpassing BMO Capital's estimate of a C$0.03 loss per share. The company's gold production volume for the quarter was also higher than anticipated, with 70.9 thousand ounces (koz) produced compared to BMO Capital's estimate of 63 koz.
In addition to the production beat, New Gold's all-in sustaining costs (AISC) for the quarter were lower than BMO Capital had estimated, coming in at $1,396 per ounce versus the anticipated $1,790 per ounce. However, these costs were still higher than the company's annual guidance range of $1,240 to $1,340 per ounce.
Despite the higher costs, New Gold's management has decided to maintain its full-year 2024 guidance, with expectations that production will be more heavily weighted towards the second half of the year. BMO Capital also noted the ongoing developments regarding the Ontario Teachers Plans agreement for New Afton, pointing out that New Gold is currently in the 60-day option period related to this agreement.
The analyst's report concluded with a reiteration of the Outperform rating and an updated price target of C$3.00, reflecting a positive outlook on New Gold's performance and prospects.
InvestingPro Insights
The recent upgrade from BMO Capital Markets aligns with several promising indicators for New Gold Inc. (NGD:CN) (NYSE: NGD), as reflected in current InvestingPro metrics and tips. Notably, the company has demonstrated a strong return over the last month with a 10.53% increase and an even more impressive three-month price total return of 48.82%. These figures underscore the positive momentum behind New Gold's stock, which is also trading near its 52-week high at 90.34% of the peak price.
InvestingPro Tips suggest that analysts are optimistic about New Gold's trajectory, expecting net income growth this year and projecting that the company will be profitable within the year. Additionally, the company's cash flows are considered robust enough to cover interest payments, a sign of financial stability. For investors seeking more detailed analysis, there are 10 additional InvestingPro Tips available, which could further inform investment decisions.
From a valuation standpoint, New Gold has a Price/Book ratio of 1.78 as of the last twelve months ending Q1 2024, indicating a potentially reasonable valuation in relation to its net assets. While the company is currently not profitable, with a negative P/E ratio of -18.12, the expected turnaround in net income could change this metric in the near future.
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