Earnings call transcript: Nexa Resources posts Q2 2026 revenue beat, EPS miss

Nexa Resources reported Q2 2026 revenue of $907.9M (+3.1% vs. $880.5M est.) but EPS of $0.52 missed forecasts of $0.77 (−32.5%), driven by higher costs and a one-time $131M Peru SUNAT tax payment that hurt free cash flow. Despite the EPS miss, adjusted EBITDA rose 78% YoY to $286M and EBITDA margin expanded to 31.5%, while net leverage fell to 1.4x from 2.28x a year ago. The company kept full-year production guidance unchanged, expecting second-half improvement as Cajamarquilla recovers from a May fire and Aripuanã’s new tailings filter ramps toward full capacity.

Analysis

NEXA is a cleaner balance-sheet story than a pure earnings story right now. The market is paying up for a sharper second-half operating cadence because a lower leverage base makes every incremental ton of recovered production more valuable to equity, while a still-loose cost structure means the upside is more sensitive to volumes and by-product credits than to headline EPS. That creates a favorable setup for the stock if industrial metals stay firm, but it also means the equity can de-rate quickly if zinc, copper, or silver soften before the operating fixes fully land.

The biggest second-order winner is likely the integrated-smelting model itself: higher internal concentrate supply and stronger by-product capture can keep unit costs below peer levels even if treatment charges remain poor. That is constructive for other Latin American polymetallic names with similar asset mixes, but a headwind for standalone smelter economics and any miner relying on third-party processing capacity. The cleaner the Q3-Q4 recovery, the more the market will start valuing NEXA on forward free cash flow rather than cyclical peak EBITDA, which is where multiple expansion can happen.

The contrarian risk is that consensus may be assuming too smooth a restart path. Weather, FX, and any slippage in plant normalization matter more than the market is pricing because they hit both margin and cash conversion simultaneously; the tax payment shows that reported cash flow can still diverge from underlying earnings. If Q3 production does not visibly inflect and free cash flow stays choppy, the current re-rating looks fragile over 1-3 months even if the 6-18 month deleveraging story remains intact.

Key Decisions for Investors

• Initiate or add to NEXA on pullbacks only, ideally on a post-earnings drift toward the low-$13s; use a 1-3 month thesis tied to Q3 volume recovery and deleveraging, with downside invalidation if the stock loses the low-$12s on heavy volume.
• Pair trade: long NEXA / short a broader metals-mining basket such as COPX for the next 4-8 weeks to isolate the idiosyncratic balance-sheet and restart upside while reducing commodity beta.
• Do not chase upside with calls yet; wait for evidence that Q3 free cash flow turns clearly positive ex-working capital. If that happens, consider a modest call-spread structure to capture multiple expansion over the next 2-3 months.
• Set an alert on zinc and silver prices: if either rolls over materially from current levels, trim NEXA because the equity is still operating with high price sensitivity despite better leverage metrics.
• Watch the SUNAT/legal overhang as a falsifier: any signal that the dispute becomes recurring cash leakage rather than a one-off would weaken the FCF recovery thesis and argue for de-risking.