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Why Markets Gave Freeport’s 3Q17 Earnings Beat a Miss

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Freeport’s 3Q17 earnings beat

Freeport-McMoRan (FCX), the world’s second-largest copper miner (XLB), released its 3Q17 earnings on October 25. The company reported adjusted net income of $492 million, which translates into adjusted EPS (earnings per share) of $0.34. Freeport posted adjusted EPS of $0.17 in 2Q17 and $0.13 in 3Q16. Freeport’s 3Q17 earnings rose on a sequential basis as well as a yearly basis.

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Price performance

Freeport’s 3Q17 earnings were better than expected. Before 3Q17, Freeport has missed consensus earnings estimates for four straight quarters. Meanwhile, despite the earnings beat, Freeport saw a negative price action of 3.48% after its earnings release. Notably, copper fell ~1.4% on October 25 to close below $7,000 per metric ton. The fall in copper prices could be the cause of Freeport’s negative price action despite the earnings beat.

Freeport has been a relative underperformer in the copper mining space this year. The stock has gained 11.4% year-to-date based on October 25 closing prices, which is even lower than copper’s gains. Copper has built on its last year’s gains, and the London Metals Exchange’s three-month copper contract is up 26.3% so far in 2017. Copper miners Glencore (GLEN-L), Southern Copper (SCCO), and Antofagasta (ANTO) have outperformed Freeport this year.

Freeport’s 2017 price performance has been negatively impacted by concerns over its Grasberg mine. The company is negotiating new terms with the Indonesian government to extend its mining permit beyond 2021.

Series overview

In this series, we’ll explore Freeport’s 3Q17 earnings in detail. Let’s start by looking at Freeport’s 3Q17 revenue in the next part of this series.

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