uploads/2017/10/part-2-revenues-1.png

Digging Deeper into Freeport-McMoRan’s 3Q17 Revenue Beat

By

Updated

Freeport’s 3Q17 revenue beat

Freeport-McMoRan (FCX) posted revenue of $4.31 billion in 3Q17. In comparison, the company posted revenues of $3.71 billion in 2Q17 and $3.87 billion in 3Q16. Freeport’s 3Q17 revenue rose on a yearly basis as well as a quarterly basis. Plus, Freeport’s 3Q17 revenues were higher than analysts were expecting. Analysts polled by Thomson Reuters were expecting Freeport to post revenues of $4.08 billion in 3Q17. In this article, we’ll look at the key drivers of Freeport’s 3Q17 revenues.

Article continues below advertisement

Shipments

For mining companies like Antofagasta (ANTO) and Southern Copper (SCCO), revenue mainly depends on shipments and commodity prices (TRQ)(RIO). Freeport sold 932 million pounds of copper, 355,000 ounces of gold, and 22 million pounds of molybdenum in 3Q17. In comparison, the company sold 942 million pounds of copper, 432,000 ounces of gold, and 25 million pounds of molybdenum in 2Q17. As you can see, Freeport’s 3Q17 shipments were lower than in 2Q17. The company also missed the shipment guidance it provided during the 2Q17 earnings call. Freeport had guided for copper shipments of 940 million pounds and gold shipments of 375,000 ounces during the 2Q17 earnings call.

Commodity prices

While fewer shipments were a drag on Freeport’s 3Q17 revenues, they were more than offset by higher commodity prices. Freeport reported average realized prices of $2.94 per pound for copper, $1,290 per ounce for gold, and $9.22 per pound for molybdenum in 3Q17. In 2Q17, Freeport reported average realized prices of $2.65 per pound for copper, $1,242 per ounce for gold, and $9.58 per pound for molybdenum.

Mining companies’ earnings are highly sensitive to underlying commodity prices. In the next and final part of this series article, we’ll see how higher copper prices boosted Freeport’s 3Q17 profits.

Advertisement

More From Market Realist