Here’s Why Brokerages Are Turning Bearish on Freeport Stock



Freeport stock

Freeport-McMoRan (FCX) has fallen 10.8% in 2017 based on its June 23, 2017, closing price. The price of copper, the key commodity that Freeport produces, has risen 5.4% over that same period. Other copper producers (BHP) have also risen, following copper prices. Southern Copper (SCCO) and Glencore (GLNCY) are trading with year-to-date gains of 9.2% and 4.7%, respectively.

With Freeport underperforming copper in 2017, let’s see how analysts are rating Freeport stock as 2Q17 comes to an end.

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Analysts’ estimates

According to estimates compiled by Thomson Reuters, Freeport carries a consensus one-year price target of $14.63. Based on its June 23, 2017, closing price, that represents a 24.4% upside. Overall, brokerages don’t look too optimistic on Freeport. The stock has received a “buy” or equivalent recommendation from only three of the 18 analysts polled by Thomson Reuters. Most analysts rate Freeport stock a “hold.”

Recent action

On June 23, 2017, Deutsche Bank cut Freeport’s price from $14 to $13. On that same day, it raised its outlook for steel stocks (XME). However, steel is a different story, led by the ongoing Section 232 imports probe. Copper producers don’t have that kind of advantage, given the commodity’s global nature.

Brokerages could be turning bearish on Freeport for two reasons. First, copper prices have been weak in 2Q17 and are off their 2017 highs. The red metal’s near-term outlook also doesn’t look very bright. Along with the macros, Freeport’s ongoing tussle with the Indonesian government has made analysts bearish on the stock. However, an early and amicable solution to the Indonesia issues could make some brokerages turn bullish on the company.

Next, let’s see how analysts are rating Southern Copper.


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