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Are Analysts’ Estimates for Freeport’s Revenues Conservative?

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Jan. 22 2018, Published 7:54 a.m. ET

Freeport’s 4Q17 revenue estimates

Freeport-McMoRan (FCX) is scheduled to release its 4Q17 earnings on January 25. In this article, we’ll look at Freeport’s 4Q17 revenue estimates. Freeport managed to beat its 3Q17 revenue estimates by a wide margin. The company posted revenue of $4.3 billion in 3Q17. Analysts polled by Thomson Reuters were expecting Freeport to post revenues of $4.1 billion for the quarter.

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Analyst estimates

Analysts polled by Thomson Reuters expect Freeport to post revenues of $4.7 billion in 4Q17, which is 9.5% higher than the sequential quarter. However, the estimates could be somewhat conservative.

To begin with, mining companies’ revenues are a function of shipments and commodity prices. Freeport is predominantly a copper miner (GLEN-L), although the company also mines molybdenum and gold. Freeport expects to ship 1.0 billion pounds of copper in 4Q17, which is 10.5% higher than its 3Q17 copper shipments (FM). Notably, Freeport has missed its shipment guidance several times over the last two years mainly due to production losses from its Grasberg mine where Rio Tinto (TRQ) (RIO) is the minority partner. However, there were no major incidents reported at Grasberg in 4Q17. Rio Tinto got its first share of copper production from Grasberg in 4Q17 after a gap of two years.

Higher shipments should support Freeport’s revenues in 4Q17. Meanwhile, along with a rising shipment profile, higher copper prices should boost Freeport’s 4Q17 revenues as well as profits. We’ll discuss this in detail in the next article.

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