Why Is Freeport-McMoRan (FCX) Up 11.9% Since Last Earnings Report?

It has been about a month since the last earnings report for Freeport-McMoRan (FCX). Shares have added about 11.9% 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 drivers.

Freeport's Earnings Beat Estimates in Q1, Sales Miss

Freeport reported net loss (attributable to common stock) of $491 million or 34 cents per share in first-quarter 2020 against net income of $31 million or 2 cents in the year-ago quarter.

Barring one-time items, adjusted loss per share came in at 16 cents, which was narrower than the Zacks Consensus Estimate of a loss of 22 cents.

Revenues fell 26.2% year over year to $2,798 million. The figure also missed the Zacks Consensus Estimate of $2,973.3 million.

Operational Update

Copper production fell 6.3% year over year to 731 million pounds in the first quarter.

Consolidated sales from mines fell 7% year over year to 729 million pounds of copper. The company produced 156,000 ounces of gold and 19 million pounds of molybdenum during the quarter.

Consolidated average unit net cash costs per pound of copper were $1.90, up 6.7% from $1.78 reported in the year-ago quarter.

Average realized price for copper was $2.43 per pound, down 16.2% year over year. Average realized price per ounce for gold increased 24.4% year over year to $1,606. Average realized price per pound for molybdenum was $11.10, down 12.5% year over year.

Financial Position

Cash and cash equivalents at the end of the first quarter were $1,602 million, down 43.5% year over year. The company’s long-term debt was around $9,829 million.

Cash flows used in operations were $38 million in the quarter under review against $534 million generated in the prior-year quarter.

Guidance

For 2020, Freeport now anticipates consolidated sales volumes to be 3.1 billion pounds of copper, down from 3.5 billion pounds expected earlier.

It expects gold sales volumes of 780,000 ounces in 2020, up from 775,000 ounces projected earlier. The company now expects sales of 80 million pounds of molybdenum, down from 88 million pounds expected earlier.

Revised Operating Plan

Freeport issued a revised operating plan with focus on maximizing cash flow and liquidity in a weak as well as uncertain economic environment. The company is implementing a series of actions to reduce operating costs and capital spending.

For 2020, the company intends to reduce operating costs by nearly $1.3 billion (or around 18%) and lower capital expenditures by roughly 30% or $800 million. It also plans to lower estimated exploration and administrative costs by around 20% (roughly $100 million) in 2020. Moreover, the company expects copper sales volumes in the Americas to reduce by around 15%.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 14.79% due to these changes.

VGM Scores

At this time, Freeport-McMoRan has a poor Growth Score of F, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second 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 trending upward for the stock, and the magnitude of these revisions looks promising. 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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