Freeport (FCX) to Post Q3 Earnings: What's in the Cards?
Freeport-McMoRan Inc. FCX is set to release third-quarter 2018 results on Oct 24, before the opening bell.
In the last reported quarter, the mining giant delivered a positive earnings surprise of 7.4% by posting adjusted earnings of 58 cents per share, which beat the Zacks Consensus Estimate of 54 cents.
Revenues went up around 39% year over year to $5,168 million, surpassing the Zacks Consensus Estimate of $4,821.2 million.
Notably, Freeport beat the Zacks Consensus Estimate in three of the trailing four quarters, with an average beat of 2%.
The stock has lost 24.1% in the past three months compared with the industry’s 13.3% decline.
Will the company surprise investors again or is it heading for a possible pullback? Let’s see how things are shaping up for this announcement.
Factors at Play in Q3
Freeport, during second-quarter earnings call, stated that it continues to anticipate consolidated sales volumes for 2018 to be roughly 3.8 billion pounds of copper, 2.4 million ounces of gold and 95 million pounds of molybdenum. Moreover, the projections include 970 million pounds of copper, 700,000 ounces of gold and 24 million pounds of molybdenum for the third quarter.
The Zacks Consensus Estimate for consolidated revenues for the third quarter for Freeport is currently pegged at $4,380 million, reflecting year-over-year increase of around 1.6%. Consolidated copper production is projected to fall roughly 2.8% year over year in the third quarter, as the Zacks Consensus Estimate is pegged at 968 million pounds.
Total copper sales from the North American Copper Mines are projected to witness a 4.8% decline year over year, as the Zacks Consensus Estimate for the third quarter is currently pegged at 357 million pounds. The segment’s volume fell 11.5% year over year in the second quarter, mainly due to expected lower ore grades and timing of shipments.
Meanwhile, total copper sales from the South American Mining are expected to witness a 3.7% decline year over year, as the Zacks Consensus Estimate for the same is currently pegged at 316 million pounds. Notably, sales the segment improved 8.7% year over year during the second quarter.
Copper sales from Indonesia Mining are expected to be almost flat year over year as the Zacks Consensus Estimate is currently pegged at 292 million pounds. Notably, the company expects copper sales from Indonesia mining to be about 1.15 billion pounds and gold sales to be 2.4 million ounces for 2018 compared with 1 billion pounds of copper and 1.5 million ounces of gold recorded in 2017.
Rising unit net cash costs for copper in North American operation is a concern. The company expects average unit net cash costs of copper for North America to be roughly $1.78 per pound for 2018, primarily indicating lower expected sales volumes. Unit net cash costs for the region rose 17.8% year over year to $1.79 per pound in second-quarter 2018. The weakness in copper prices is another concern for Freeport, which may affect its margins in the to-be-reported quarter.
Nevertheless, focus on productivity along with cost and capital discipline are likely to support Freeport’s earnings in the third quarter.
Freeport-McMoRan Inc. Price and EPS Surprise
Freeport-McMoRan Inc. Price and EPS Surprise | Freeport-McMoRan Inc. Quote
Our proven model does not show that Freeport is likely to beat estimates this quarter. That is because a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below:
Earnings ESP: Earnings ESP for Freeport is -6.63%. This is because the Most Accurate Estimate and the Zacks Consensus Estimate are currently pegged at 31 cents and 33 cents, respectively. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Freeport currently carries a Zacks Rank #3, which when combined with a negative ESP, makes surprise prediction difficult. You can see the complete list of today’s Zacks #1 Rank stocks here.
Note that we caution against Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks Poised to Beat Estimates
Here are some companies in the basic materials space you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:
CF Industries Holdings, Inc. CF has an Earnings ESP of +12.07% and carries a Zacks Rank #1.
The Mosaic Company MOS has an Earnings ESP of +2.17% and carries a Zacks Rank #3.
FMC Corporation FMC has an Earnings ESP of +1.09% and carries a Zacks Rank #3.
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