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Freeport-McMoRan (FCX) Up 14.8% Since Last Earnings Report: Can It Continue?

Zacks Equity Research

A month has gone by since the last earnings report for Freeport-McMoRan (FCX). Shares have added about 14.8% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Freeport-McMoRan due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Freeport's Earnings In Line, Sales Lag Estimates in Q3

Freeport logged net loss (attributable to common stock) of $131 million or 9 cents per share in third-quarter 2019, against a profit of $556 million or 38 cents in the year-ago quarter. The bottom line in the reported quarter was hurt by lower copper production and prices.

Barring one-time items, adjusted loss came in at a penny per share, which matched the Zacks Consensus Estimate.

Revenues dropped around 33% year over year to $3,308 million, missing the Zacks Consensus Estimate of $3,579 million.

Operational Update

Copper production fell roughly 14% year over year to 864 million pounds in the reported quarter.

Consolidated sales from mines were 795 million pounds of copper, 243,000 ounces of gold and 22 million pounds of molybdenum. Copper sales volume fell around 24% year over year.

Consolidated average unit net cash costs per pound of copper were $1.59, up from 93 cents reported in the year-ago quarter.

Average realized price for copper was $2.62 per pound, down around 6% from $2.80 in the prior-year quarter. Average realized price per ounce for gold rose nearly 25% to $1,487 from $1,191 in the year-ago quarter. Average realized price per pound for molybdenum was $12.89, up 4% year over year.

Financial Position

Cash and cash equivalents at the end of the quarter were $2,247 million, down roughly 51% year over year. The company’s total debt was around $9.9 billion, down around 12% year over year.

Freeport’s operating cash flows were $224 million in the reported quarter.

Guidance

Freeport anticipates consolidated sales volumes for 2019 to be roughly 3.3 billion pounds of copper, 874,000 ounces of gold and 92 million pounds of molybdenum. This projection also includes 870 million pounds of copper, 200,000 ounces of gold and 24 million pounds of molybdenum for fourth-quarter 2019.

For 2019, the company expects operating cash flows of roughly $1.6 billion. Capital expenditures are expected to be around $2.6 billion, which includes $1.6 billion for major mining projects that are mainly related to underground development in Grasberg, Indonesia and development of the Lone Star copper leach project.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -91.45% due to these changes.

VGM Scores

At this time, Freeport-McMoRan has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Freeport-McMoRan has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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