Freeport-McMoRan Inc. (NYSE:FCX) shareholders are probably feeling a little disappointed, since its shares fell 3.4% to US$13.12 in the week after its latest second-quarter results. Although revenues of US$3.1b were in line with analyst expectations, Freeport-McMoRan surprised on the earnings front, with an unexpected (statutory) profit of US$0.03 per share a nice improvement on the losses that the analystsforecast. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.
Taking into account the latest results, Freeport-McMoRan's 14 analysts currently expect revenues in 2020 to be US$12.7b, approximately in line with the last 12 months. Earnings are expected to improve, with Freeport-McMoRan forecast to report a statutory profit of US$0.012 per share. Yet prior to the latest earnings, the analysts had been forecasting revenues of US$12.9b and losses of US$0.11 per share in 2020. Although we saw no serious change to the revenue outlook, the analysts have definitely increased their earnings estimates, estimating a profit next year, compared to previous forecasts of a loss. So it seems like the consensus has become substantially more bullish on Freeport-McMoRan.
The analysts have been lifting their price targets on the back of the earnings upgrade, with the consensus price target rising 6.1% to US$14.75. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values Freeport-McMoRan at US$20.00 per share, while the most bearish prices it at US$11.70. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. One more thing stood out to us about these estimates, and it's the idea that Freeport-McMoRan'sdecline is expected to accelerate, with revenues forecast to fall 1.6% next year, topping off a historical decline of 0.4% a year over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 8.1% per year. So while a broad number of companies are forecast to decline, unfortunately Freeport-McMoRan is expected to see its sales affected worse than other companies in the industry.
The Bottom Line
The most important thing to take away is that there's been a clear step-change in belief around the business' prospects, with the analysts now expecting Freeport-McMoRan to become profitable next year. On the plus side, there were no major changes to revenue estimates; although forecasts imply revenues will perform worse than the wider industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Freeport-McMoRan analysts - going out to 2024, and you can see them free on our platform here.
Plus, you should also learn about the 1 warning sign we've spotted with Freeport-McMoRan .
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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