Inside Freeport-McMoRan’s Earnings Estimates

Freeport-McMoRan’s earnings estimates

According to consensus estimates compiled by Thomson Reuters, Freeport-McMoRan (FCX) is expected to generate adjusted EBITDA[1. earnings before interest, tax, depreciation, and amortization] of ~$1.4 billion in 3Q17 and ~$1.6 billion in 4Q17.

Freeport-McMoRan posted generated adjusted EBITDA of ~$2.2 billion in 1H17. Analysts expect the company’s earnings to rise in the coming quarters.

Inside Freeport-McMoRan’s Earnings Estimates

Copper prices

Freeport-McMoRan’s earnings are expected to rise further in 2018. The company is expected to post adjusted EBITDA of $6.6 billion in 2018. To put this in context, consider that Freeport-McMoRan is expected to generate EBITDA of $5.1 billion this year. Analysts expect Freeport’s EBITDA to rise ~30% in 2018.

Analysts’ optimism over Freeport-McMoRan’s 2018 earnings outlook appears to be driven by several factors. Primarily, copper prices have been strong, which could have prompted some analysts to model higher copper prices.

Freeport-McMoRan expects its 2018 EBITDA to rise or fall by $360 million for every rise or fall in copper prices of $0.10 per pound. Other copper miners like Glencore International (GLNCY) and Teck Resources (TECK) also have varying sensitivities to copper prices (RIO).

Grasberg

Secondly, we’ve seen upward price action in gold. Freeport-McMoRan’s gold volumes are expected to spike next year as it finishes open pit mining operations in its Grasberg operations. Notably, Freeport-McMoRan’s Grasberg operations were hit by a labor action as well as an export ban this year that negatively impacted its 1Q17 earnings.

Now, Freeport-McMoRan has reached a framework with Indonesia to extend its long-term mining rights in the country. You can read Freeport-McMoRan Investors: Hold the Celebration for a detailed analysis of FCX’s framework with Indonesia (EIDO).

In the final article, we’ll see how markets are valuing Freeport-McMoRan.