Earnings call transcript: Nexa Resources Q1 2026 misses EPS forecast, stock dips

Nexa Resources reported Q1 2026 revenue of $888 million, beating estimates by 1.72% and rising 42% year over year, while adjusted EBITDA jumped 126% to $283 million. The offset was an EPS miss of $0.67 versus $0.7885 expected, which triggered a 12.88% after-hours selloff to $13.93. Management reiterated 2026 capex guidance of $381 million, expects higher cash generation as the Cerro Lindo silver stream steps down, and said net leverage should stay below 1.7x through 2026.

Analysis

The market is fixating on the EPS miss, but the deeper signal is that Nexa is transitioning from a price-only story to a volume-plus-optionalities story. The quarter shows operating leverage still intact, and the step-down in the Cerro Lindo silver stream creates a cleaner cash conversion profile starting now, which should mechanically improve equity value even if base metals stay range-bound. That makes the selloff look more like a multiple reset on headline earnings than a reassessment of medium-term cash generation.

The second-order winner is the balance sheet. Lower leverage plus incremental cash from silver means Nexa can self-fund growth optionality earlier than the market expects, especially if Brazilian smelter recoveries continue and Peru normalizes. The important nuance is that this is not just debt paydown; once the market sees sustained free cash flow inflect in Q2/Q3, the company can re-rate on reduced financing risk before any M&A or phase-2 Cerro Pasco capital is actually committed.

The main risk is that smelting economics remain structurally tight even if operating execution improves, so earnings quality will still be noisy quarter to quarter. That means the stock can stay volatile until investors separate cyclical TC pressure from asset-level improvements. If copper and silver stay supportive, the downside is likely capped by cash flow, but a reversal in precious metals or a renewed Peru disruption would hit both sentiment and valuation fast.

Consensus is probably underestimating how much the silver stream change shifts the capital allocation equation. The market is treating it as a modest revenue tailwind; in reality it is a persistent free-cash-flow upgrade that should lower the perceived need for dilutionary growth funding. The move may also be overdone because the stock already had a very extended run, so the post-print drop likely reflects crowded momentum unwinding rather than fundamental deterioration.

Key Decisions for Investors

• Long NEXA on 1-3 month horizon into Q2 cash-flow normalization; use the post-earnings selloff as entry. Target a rebound toward pre-print levels if Peruvian production normalizes and the silver stream benefit shows up in reported cash flow. Risk: smelting margins stay weak and the market keeps discounting headline EPS.
• Buy NEXA Jan-2027 calls or call spreads to express leverage to deleveraging + silver stream upside. This is the cleaner way to capture a multi-quarter re-rating without being whipsawed by near-term EPS noise. Risk/reward improves if the stock stabilizes above the post-print gap-down area.
• Pair trade: long NEXA / short a more purely smelting-exposed zinc processor with weaker byproduct leverage. Nexa’s byproduct mix and balance-sheet trajectory make it less exposed to low TC compression than the pure smelter peer set. Monitor for any Peru operational relapse.
• If long already, sell upside calls against NEXA for the next 1-2 quarters to harvest elevated volatility while the market digests the guidance. The stock can grind higher on FCF delivery, but the crowded ownership and recent run make near-term upside likely to be choppy.