On Friday, Citi updated its financial model for Nexa Resources (NYSE:NEXA), leading to a price target increase to $7.50 from the previous $6.00, while the firm keeps its Neutral rating on the stock. The adjustment comes as the analyst anticipates stronger fourth-quarter earnings before interest, taxes, depreciation, and amortization (EBITDA), now estimated at $109 million, a 9% revision. This revision is largely attributed to higher-than-expected zinc production, particularly noting improvements at the Cerro Lindo mine.
The forecast for the 2024 adjusted EBITDA was also raised by 2%, following the company's guidance for reduced costs, even as zinc production expectations remain largely unchanged. The analyst highlighted that the projections include the anticipated impact of lower operational expenses on the company's financial performance.
Nexa Resources' Aripuana project remains a point of interest, with production reiterated at approximately 50 kilotons. The commencement of free cash flow (FCF) from Aripuana is anticipated in the second half of the year, contingent upon the success of the upgraded pumping systems. This development is seen as a potential catalyst for the company.
Despite the positive adjustments to Nexa's financial model, Citi maintains a Neutral stance on the stock. This position reflects Citi's neutral-to-bearish outlook on the zinc market and considerations of recent delays in mine operations. The analyst cited valuation multiples at approximately 5 times EBITDA and roughly 6% FCF yield based on the estimated earnings for 2024.
InvestingPro Insights
As Citi updates its financial model for Nexa Resources, it's insightful to consider additional data and metrics that could influence investor decisions. According to InvestingPro data, Nexa Resources has a market capitalization of approximately $927.07 million, reflecting the scale of the company within the mining sector. The company's P/E ratio stands at -2.74, suggesting that investors are currently valuing the company's earnings negatively, which aligns with Citi's neutral outlook.
InvestingPro Tips for Nexa Resources highlight that the company operates with a significant debt burden and analysts have revised their earnings downwards for the upcoming period. These factors could be contributing to the cautious stance from investors and analysts alike. On the other hand, Nexa pays a significant dividend to shareholders, with a dividend yield of 7.43%, which could appeal to income-focused investors.
The company's stock has experienced a strong return over the last three months, with a price total return of 22.81%, and a large price uptick over the last six months, at 39.17%. This performance may attract investors looking for momentum in the market. However, it's worth noting that Nexa is trading near its 52-week high, which can sometimes indicate limited upside potential.
Investors interested in a deeper analysis of Nexa Resources can find additional InvestingPro Tips by visiting InvestingPro. There are 11 more tips available, which could provide further insights into the company's financial health and market position. For those considering an InvestingPro subscription, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.