Why Is Freeport-McMoRan (FCX) Down 20.1% Since Last Earnings Report?

A month has gone by since the last earnings report for Freeport-McMoRan (FCX). Shares have lost about 20.1% in that time frame, underperforming the S&P 500.

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

Freeport Beats Q2 Earnings, Trails Sales Estimates

Freeport reported net loss (attributable to common stock) of $72 million or 5 cents per share in second-quarter 2019, against net profit of $869 million or 59 cents in the year-ago quarter. The bottom line in the reported quarter was hurt by lower copper prices and production.

Barring one-time items, adjusted loss came in at 4 cents per share, which was narrower than the Zacks Consensus Estimate of a loss of 5 cents.

Revenues declined around 31.4% year over year to $3,546 million. Also, the figure trailed the Zacks Consensus Estimate of $3,591.1 million.

Operational Update

Copper production fell nearly 23.5% year over year to 776 million pounds in the reported quarter.

Consolidated sales from mines were 807 million pounds of copper, 189,000 ounces of gold and 24 million pounds of molybdenum. Copper sales volume fell 18.4% year over year.

Consolidated average unit net cash costs per pound of copper for was of $1.92, up from 96 cents reported in the year-ago quarter.

Average realized price for copper was $2.75 per pound, down around 10.7% from $3.08 in the prior-year quarter. Average realized price per ounce for gold rose nearly 6% to $1,351 from $1,274 in the year-ago quarter. Average realized price per pound for molybdenum was $13.15, up 2% year over year.

Financial Position

Cash and cash equivalents at the end of the quarter were $2,623 million, down roughly 32.6% year over year. The company had long-term debt of $9.9 billion, down around 10.9% year over year.

Freeport’s operating cash flows were $554 million in the quarter.

Guidance

Freeport anticipates consolidated sales volumes for 2019 are expected to be roughly 3.3 billion pounds of copper, 0.8 million ounces of gold and 94 million pounds of molybdenum. This projection also includes 830 million pounds of copper, 230,000 ounces of gold and 25 million pounds of molybdenum for third-quarter 2019.

For 2019, the company expects operating cash flows at nearly $1.9 billion. Capital expenditures are expected to be around $2.6 billion, which includes $1.6 billion for major mining projects that are 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 review have trended upward during the past month. The consensus estimate has shifted -10% due to these changes.

VGM Scores

At this time, Freeport-McMoRan has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

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

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions has been net zero. 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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