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Freeport-McMoRan (FCX) Up 23.6% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Freeport-McMoRan (FCX - Free Report) . Shares have added about 23.6% 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 and Revenues Miss Estimates in Q4

Freeport reported net income (attributable to common stock) of 9 cents per share in fourth-quarter 2018, down from 70 cents in the year-ago quarter. The figure excludes net charges of $21 million or 2 cents per share related to accruals for disputed royalty matters in Peru and net charges at PT-FI. The results were also hurt by lower copper prices.

Barring one-time items, adjusted earnings came in at 11 cents, which missed the Zacks Consensus Estimate of 21 cents.

Revenues went down around 26.9% year over year to $3,684 million. Also, the figure trailed the Zacks Consensus Estimate of $3,848.9 million.

Consolidated sales from mines totaled 785 million pounds of copper, 266,000 ounces of gold and 24 million pounds of molybdenum. Copper sales volume fell 23% year over year.

FY18 Highlights

For 2018, net income (attributable to common stock) totaled $2,257 million or $1.55 per share, up from $1,817 million or $1.25 in the year-ago quarter.

Total revenues went up roughly 13.6% year over year to $18,628 million.

Operational Update

Consolidated average unit net cash costs of $1.54 per pound of copper for the fourth quarter were higher than $1.03 reported in the year-ago quarter.

Average realized price for copper was $2.75 per pound, down 14.3% year over year from $3.21. Average realized price per ounce for gold fell to $1,255 from $1,285 in the year-ago quarter, while average realized price per pound for molybdenum was $12.75 per pound.

Mining Update

North America Copper Mines: Copper sales fell 5.9% year over year to 333 million pounds. Production fell 3.8% to 353 million pounds.

Freeport expects copper sales from North America to be 1.4 billion pounds in 2019, in line with 2018 levels.

South America Mining: Copper sales were 325 million pounds in the quarter, up from 312 million pounds in the year-ago quarter.

Freeport projects South America mining to report sales of around 1.3 billion pounds of copper in 2019, compared with 1.25 billion pounds of copper in 2018.

Indonesia Mining: Copper sales of 127 million pounds declined from 351 million pounds in the year-ago quarter.  

Gold sales declined to 261,000 ounces from 584,000 ounces in the year-ago quarter. Gold production fell to 327,000 ounces from 562,000 ounces in the prior-year quarter.

Sales from Indonesia mining are anticipated to be about 0.6 billion pounds of copper and 0.8 million ounces of gold for 2019 compared with 1.1 billion pounds of copper and 2.4 million ounces of gold for 2018.

Molybdenum Mines: Molybdenum production was 9 million pounds in the fourth quarter, up from 8 million pounds year-ago quarter’s tally.

 



Financial Position

Freeport’s operating cash outflows totaled $62 million in the fourth quarter, which includes $400 million in working capital use and other tax payments.

Cash and cash equivalents at the end of 2018 was $4,217 million, down 6.8% year over year. The company had total debt of $11.1 billion as of Dec 31, 2018, down from roughly $13.1 billion as of Dec 31, 2017.

Guidance

Freeport anticipates consolidated sales volumes for 2019 (reflecting a transition year) to be roughly 3.3 billion pounds of copper, 0.8 million ounces of gold and 94 million pounds of molybdenum, including 0.8 million pounds of copper, 255,000 ounces of gold and 24 million pounds of molybdenum for first-quarter 2019.

For 2019, the company expects operating cash flows to be roughly $1.8 billion. Capital expenditures are expected to be around $2.4 billion, which includes $1.5 billion for major mining projects mainly related to underground development in the Grasberg and the Lone Star oxide project.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -66.25% due to these changes.

VGM Scores

Currently, 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 C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. 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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