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What to Expect from Freeport-McMoRan’s 3Q15 Earnings

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Nov. 20 2020, Updated 4:02 p.m. ET

3Q15 earnings expected on October 22

Freeport-McMoRan (FCX) is expected to release its 3Q15 financial results on October 22. According to a Bloomberg survey, the company is expected to post an EBITDA (earnings before interest, taxes, depreciation, and amortization) of $965 million on sales of $4.1 billion in the quarter. In 2Q15, Freeport posted an adjusted EBITDA of $1.2 billion on net revenues of $4.2 billion.

Investors looking at direct exposure to base metals can also consider the PowerShares DB Base Metals ETF (DBB).

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Could Freeport surprise us?

In each of the last five quarters, Freeport’s share price has fallen after it released its earnings. Its 2Q15 earnings were met with a major negative reaction on Wall Street, and the stock tumbled ~10% after the earnings announcement.

Spot copper prices have averaged $5,259 per metric ton in 3Q15 compared to $6,043 per ton in the previous quarter. WTI (West Texas Intermediate) has averaged $46 per barrel in 3Q15 compared to $58 in 2Q15.

Looking at Freeport’s earnings sensitivity to WTI and copper prices, its 3Q15 earnings could take a hit compared to the previous quarter. A positive earnings surprise seems unlikely considering the way commodity prices have trended in the quarter.

What should you watch for?

  • You should watch how Freeport’s unit production costs progress in 3Q15. Freeport’s unit cash costs are currently higher compared to Rio Tinto (RIO), BHP Billiton (BHP), and Turquoise Hill Resources (TRQ). The graph above shows Freeport’s unit cash costs compared to other copper producers.
  • You should look for any clarity in Freeport’s energy business in the 3Q15 earnings conference call. The company is currently reviewing several options, including the previously announced IPO (initial public offering), the spin-off, the joint venture agreement, and further spending cuts.

Visit Market Realist’s Copper page to learn more about Freeport-McMoRan.

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