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Why Analysts Expect Freeport-McMoRan’s 3Q16 Revenue to Rise

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Freeport-McMoRan’s 3Q16 revenues

According to data compiled by Bloomberg, analysts expect Freeport-McMoRan (FCX) to post revenue of ~$4.0 billion in 3Q16 and $4.6 billion in 4Q16. In contrast, Freeport posted revenue of nearly ~$3.7 billion in 3Q15 and ~$3.3 billion in 2Q16.

Analysts expect Freeport’s 3Q16 revenue to rise on a yearly basis as well as on a quarterly basis. Notably, Freeport’s revenue has fallen on a year-over-year basis for eight consecutive quarters.

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Key drivers

The revenues of commodity producers such as Rio Tinto (RIO), Southern Copper (SCCO), and Teck Resources (TCK) are intertwined with commodity prices (DBC) and shipments. For 3Q16, Freeport gave a guidance of ~1.3 billion pounds of copper, 410,000 ounces of gold, 20 million pounds of molybdenum, and 11.4 MMboe (million barrels of oil equivalent).

In contrast, Freeport sold 1.1 billion pounds of copper, 19 million pounds of molybdenum, 12.4 MMboe, and 156,000 ounces of gold in 2Q16.

Shipments

Freeport expects its shipments to rise across all commodities except for energy. Note that the companies higher copper volumes have mainly been due to its Cerro Verde expansion. Its higher gold volumes have been led by more gold production at its Grasberg mine.

Although copper is the key driver of Freeport-McMoRan’s earnings, its earnings could get a leg up in the next few quarters due to higher gold volumes from its Grasberg mine. Freeport-McMoRan’s 1H16 gold volumes totaled only 357,000 ounces. However, the company expects its gold volumes to rise to ~1.4 million ounces in 2H16.

In the next article, we’ll see how commodity prices could impact Freeport’s 3Q16 earnings.

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