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Economic activity likely slowed from Q3; US Q4 GDP expected to rise just 4.2%
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Freeport-McMoRan Inc. (FCX)
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Based on my interpretation of info presented yesterday I believe 1st quarter 2021 earnings will be 46 cents. That’s assuming copper at 3.50 which increases profits 380m on an annual basis, let’s say 90 m quarterly. 15 million is roughly 1 cent per share. That is ignoring a slight decrease in volume projected for first quarter. After that volume is projected to increase around 100 million lbs but mostly at Grasberg. So deduct half of the increase.. Unit cost is 25 cents there , 50 million times 3,00 is 150 million . This allows 25 cents for taxes etc 150 million is 10 cents per share. So second quarter earnings could be 39 plus 6 for 3,50 price plus 10 for production increase for a total of 56 cents. Potentially 2,24 annually. At 15 PE price per share should be 33.60
My reaction to the earnings is that FCX figured out how to ruin a game that was all but won. Start with the dividend. Still talking about it for 2021. Makes me think we might get one now by Christmas. That dividend was take. Away nearly a year ago as a precaution during the virus meltdown. Seemed prudent at the time yet copper played perfectly for FCX and the storm never came. It for better. A cash piñata
All was good going into the earnings call. And then Richard grabbed the microphone and did what he does so often. Sends the crowds to the exits. Tucking it up about everything but facts on how big for how long. Speculative talk when direct facts were Called for.
FCX missed a golden opportunity to finally reward shareholders. Not only did they not do that. They disappointed analysts who walked away with little to chew on.
This ball was teed up so nicely that we were all licking our chops and they have what I thought was an uneventful lazy presentation that left everyone flat.
Copper did the work for FCX in the last few months. Adkerson fixed that in an hour.
FCX will bounce back as it’s worth some nice multiple of all that elusive future cash flow.
Richards free beer tomorrow sign needs to be dusted off for the next earnings day.
Freeport-McMoRan (NYSE:FCX) reported quarterly earnings of $0.39 per share which beat the analyst consensus estimate of $0.38 by 2.63 percent. This is a 1850 percent increase over earnings of $0.02 per share from the same period last year. The company reported quarterly sales of $4.50 billion which beat the analyst consensus estimate of $4.21 billion by 6.77 percent. This is a 14.93 percent increase over sales of $3.91 billion the same period last year.
Noise has brought this stock down, but the fundamentals and the story hasn’t changed. I believe this is a big buying opportunity
Another executive order signed today making all Federal vehicles electric, including mail carriers. That's about 650,000 vehicles, and a lot of copper.
I think FCX will significantly beat the 38-39 cent quarterly EPSs estimates on Tuesday, but I don't think the stock will move upwards in any aggressive or sustainable manner. I think the stock is a "hold" going into earnings. It has had a nice run and Q4 commodity prices were well documented. The announcement of a stock buyback or dividend (my preference) will obviously affect the price movement.
Of course, market momentum, in regard to specific industries, is difficult to predict. Markets face a "new" Covid, higher taxes, and greater corporate regulations ... offset by anticipated government stimulus and hoped success of vaccines. Enthusiasm over "green" trends benefiting copper prices in 2021 may or may not lose luster as reality sets in. The US dollar may remain relatively strong as US deficits compare favorably to other major currency nations. China -- essentially an export economy -- will likely continue to publish strong economic numbers that remain suspect
I admit that a "hold" recommendation may be a crutch for someone who doesn't know what to expect. To that I plead guilty.
NET INCOME ATTRIBUTABLE TO COMMON STOCK TOTALED $708 MILLION, $0.48 PER SHARE, IN FOURTH-QUARTER 2020
FOURTH-QUARTER 2020 ADJUSTED NET INCOME ATTRIBUTABLE TO COMMON STOCK TOTALED $566 MILLION, OR $0.39 PER SHARE
QTRLY CONSOLIDATED SALES TOTALED 866 MILLION POUNDS OF COPPER, 293 THOUSAND OUNCES OF GOLD AND 21 MILLION POUNDS OF MOLYBDENUM
CAPITAL EXPENDITURES FOR THE YEAR 2021 ARE EXPECTED TO APPROXIMATE $2.3 BILLION
AT DECEMBER 31, 2020, CONSOLIDATED DEBT TOTALED $9.7 BILLION AND CONSOLIDATED CASH TOTALED $3.7 BILLION
QTRLY REVENUES $4,495 MILLION VERSUS $3,911 MILLION
CONSOLIDATED SALES FOR THE YEAR 2021 ARE EXPECTED TO APPROXIMATE 3.8 BILLION POUNDS OF COPPER, 1.3 MILLION OUNCES OF GOLD
CONSOLIDATED SALES FOR THE YEAR 2021 ARE EXPECTED TO APPROXIMATE 85 MILLION POUNDS OF MOLYBDENUM
RAMP-UP OF GRASBERG UNDERGROUND ADVANCING ON SCHEDULE
SEES Q1 CONSOLIDATED SALES OF 825 MILLION POUNDS OF COPPER, 275 THOUSAND OUNCES OF GOLD AND 20 MILLION POUNDS OF MOLYBDENUM
OPERATING CASH FLOWS ARE EXPECTED TO APPROXIMATE $5.5 BILLION FOR THE YEAR 2021
QTRLY AVERAGE REALIZED PRICE PER POUND FOR COPPER $3.40
QTRLY AVERAGE REALIZED PRICE PER OUNCE FOR GOLD $1,870
FREEPORT-MCMORAN-RELATED TO COMMITMENT TO DEVELOP MORE SMELTER CAPACITY IN INDONESIA, PT-FI ADVANCED DISCUSSIONS WITH MAJORITY OWNER OF GRESIK SMELTER
Q4 EARNINGS PER SHARE VIEW $0.38, REVENUE VIEW $4.21 BILLION
When does everyone think they will Announce the dividend ?!
A quote attributed to Warren Buffet:
"If the market were rational I'd be waiting tables."
Don't let me influence you or anything...........
But here is a little FCX factoid that will boil your blood..........
I believe it's safe to say that the collective market was UPSET about the earnings, and most likely the modest reduction in 2021e copper output guidance as well.
Market was probably expecting a large beat of $0.38/sh. consensus.
They had $0.14/sh. total "adjustments to net income" that were positive to EPS in Q4, and only managed to beat the consensus EPS target by a mere penny. This is a subjective, non-GAAP exercise, that is basically whatever nonsense FCX wants to dream up to sell the market on the viability of it's EPS numbers.
Of those $0.14/sh. in adjustments, as found on p. 18 of their News Release [dated 1/26/21], at least $0.07/sh. of adjustments are pretty shaky as legit add-backs in my opinion. I'm a CPA with over 30 yrs. of experience, some of it in the mining industry, and this gamesmanship on 'adjustments' to EPS is a phenomena that got started about 15 yrs. ago, and has taken on a whole new life of it's own.
They needed to beat in serious fashion, without all the fantasy stuff "that doesn't count".
Beat by good margin.
Go big or go home, right?
BUT HERE IS WHERE YOUR BLOOD WILL BOIL...........
They have $1.285 billion in finish goods inventory on hand as of December 31, 2020, stated as cost. Typically, about 2/3 of that is finished goods, that can be sold immediately.
And miners are price takers, who can basically sell (or not sell) whatever amount of product they want.
That's what the spot market exists for.
If they needed to "swag another nickel" in earnings. they needed to sell another $100mm of this inventory (again stated at cost - about $2.00/lb say using typical full absorption costing....).
Such a sale would have realized proceeds of as much as $3.50/lb. for each lb. of copper sold if sold in December, and would have represented a paltry 50 mm. lbs. of inventory (or 10-15% of the finished goods inventory on hand at 12/31/2020.
This could have been sold into the spot market with a simple phone call (or two), on nearly the last day of the year with minimal requirements on deliver before 12/31/2020. Simple inventory segregation, and risk of loss paperwork to comply with ASC 606, and boom, done.
Trafigura (commodity trading house) would have snapped this up in an instant), and made their own arrangements for delivery (to whoever, where ever).
That boils my GD blood.
FCX - not too bright.
Dumb Farmer spent 1/3 the call yesterday blathering about his CopperMark nonsense, and how he's some bigwig director in charge of some ESG copper organization (outside of FCX).
Putz needs to spend more time on the job with FCX for his $20mm annual salary because he sure ain't earning it.
And neither is his dumb girl friend, Kathleen Quirk, most overpaid CFO in the Western Hemisphere.
Both need a brush back........with a 110 mph fastball, as far as I'm concerned.
Where's Nolan Ryan when you need him (in his prime).....?
So, and by extension, it's anyone's guess what the board of directors will do with managements request for some %-based quarterly dividend scheme, or how soon they'll act.
If they flubbed the quarter (which they could have tripped over and still beat), what will the BoD think of this dividend plan.............?
And how soon will they act............?
$0.38/sh. is still the consensus estimate for Q4.
We should beat that.
I've done an in-depth analysis and my guess is $0.45/sh. to $0.46/sh. with revenue slightly over $4.3bb.
I posted assumptions in original post two weeks ago, not much has changed.
Realized copper price [computed consistent with Q3 CC slide 31) is $3.41 [consists of 50/50 avg. of quarterly avg. copper price and price at end of period, per FCX].
If they beat on sales (and output of copper at NA division and/or copper/gold at Grasberg), EPS estimate goes up to $0.50/sh. Beyond that, FCX will throttle it back.
I suspect NA copper Q4 output/sales are consistent with Q3 numbers (at 379mm sales).
FCX has this division's output/sales estimated at 1.435bb for full year 2020e, and by extension 333mm lbs. (based on cumulative YTD Q3's 1.102bb sales). Difference is 333mm lbs. implying sharp drop in Q4 output vs. Q3. It shouldn't work that way with Safford/Lone Star. That operation has already been increasing output in 2020. So FCX was either extra cautious in estimating 2020 NA division, or they were hedging (with sandbags) a bit.
This a bit of a mystery, what NA division output/sales will be.
Tomorrow is our FCX Superbowl! Time to make predictions. My estimate is 73 cents..43 cents from operations, and 30 cents one time credit from sale of African mine. Waiting for your estimate!!
Hard to believe FCX beat expectations by only a penny given the high price of copper. Just wait till our Grasberg ownership position drops to 49% on 01/01/23 and the copper supply increases given all the new mine development!! Look out below!!
This was published by MS at 8:21 eastern this morning. Overweight rating and $28 PT unchanged -- not much more than a summary of earnings release
Outlook Likely Conservative
4Q20 Highlights: Adjusted EBITDA of $1,856m ahead of our $1,624m estimate
and the consensus of $1,636m. Relative to our model, the beat was driven by
higher revenues (better copper and gold volumes) as well as lower costs. Adj.
EPS of $0.39 was modestly lower than MSe $0.40, but basically in line with
consensus of $0.38.
Key takeaways: i) Cash from operations of $1,327m in 4Q20 was ahead of MSe
$1,132m; ii) Copper volumes in 4Q20 were 864m lbs,2% higher vs MSe 850m lbs
and guidance of 840m lbs; gold volumes were 293k oz, 6% better than MSe of
276k oz and ahead of guidance of 270k oz; iii) Copper net cash costs were
$1.28/lb vs MSe $1.32/lb; iv) The company expects capex of ~$2.3b in 2021,
including $1.4b for major projects,vs MSe of $2.9b (with an estimated $600m
for the Indonesian smelter, not included in the company's guidance); v) Guidance
for drawbelling at DMLZ in 2021 lowered to 15/quarter vs 17/quarter previously,
drawbelling guidance at BGC unchanged; guidance for open drawbells lowered
to 201 in 2021 at MDLZ vs 209 previously, but increased to 330 at GBC vs 324
Outlook: FCX expects consolidated sales in 1Q21 at 0.825b lbs of copper (vs.
MSe 0.921 b lbs),275k oz of gold (vs. MSe 295k oz), and 20m lbs of molybdenum
(vs. MSe 20m lbs). Management guided to 1Q21 net cash costs of $1.37/lb, vs MSe
of $1.31/lb.For the full year, consolidated sales are expected to reach ~3.8b lbs
of copper and ~1.3m oz of gold vs MSe of 3.81b lbs copper and 1.4m oz gold, see
Exhibit 1. The company expects 2021 net unit cash costs to average $1.25/lb vs.
MSe of $1.22/lb; guidance assumes gold prices of $1,850/oz and molybdenum of
$9.00/lb for 1Q21,vs. Morgan Stanley's deck of $1,799/oz and $11.7/lb.
Commodity prices consolidate before next jump that will be caused by big stimulus pushed through the congress. It makes sense to increase portfolio exposure to equities, esp. commodity-related equities before the jump.
I got in again - I had to reset
Eat lunch out some $ to safety
Now like Randall said earlier it’s time to lead this charge . We did it for months regroup and get back to the game
I say the lows have been hit and strong resistance at .77 close over 26.00
This day has shaken me.
This drop has me re-evaluating my whole life.
Just once, can I get an earnings break?
20 years of investing, and I am always Charlie Brown getting had by Lucy.
Last time I sold to quick and went up Friday 1.5%
Not happing again
Holding on to all shares till after earnings
Second day of buying opportunities coming. Yesterday I bought fcx. Today it will be something else. Call it diversification. Good luck, folks, to your investments and trading today.
If market reaction to FOMC at 2PM is positive, then it can be green by eod.
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