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These Factors Could Drive Freeport’s 4Q17 Financial Performance

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Jan. 22 2018, Updated 10:55 a.m. ET

Freeport’s 4Q17 financial performance

Previously, we noted that Freeport-McMoRan’s (FCX) 4Q17 revenue estimates look conservative. In this article, we’ll look at Freeport’s adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) estimates and analyze what could drive the company’s 4Q17 financial performance.

Analysts polled by Thomson Reuters expect Freeport to post adjusted EBITDA of $2.0 billion in 4Q17. To put this in context, consider that the company posted adjusted EBITDA of $1.61 billion in 3Q17 and $1.68 billion in 4Q16. Let’s see what factors could drive Freeport’s 4Q17 EBITDA.

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Key drivers

  • Freeport’s 4Q17 EBITDA should get a boost from higher sequential copper shipments. As noted previously, Freeport expects 4Q17 copper shipments to rise 10.5% as compared to 3Q17.
  • Along with higher copper production, Freeport’s 4Q17 earnings could also reflect the positive impact from lower unit production costs. Freeport expects its unit cash costs to fall in 4Q17 as compared to the sequential quarter. The bulk of the improvement is expected to come from lower unit cash costs at the Grasberg mine. Freeport’s gold volumes are expected to rise in 4Q17, which should lead to lower unit cash costs after by-product credits.
  • Along with higher shipments and lower unit cash costs, higher copper prices are expected to positively impact Freeport in 4Q17. Copper prices averaged $3.09 per pound in 4Q17 as compared to $2.89 per pound in 3Q17. Other copper miners like Glencore (GLEN-L), Antofagasta (ANTO), and Anglo American (AAL-L) are also expected to benefit from higher copper prices (SCCO).

The above-mentioned factors are expected to boost Freeport’s 4Q17 profitability. In the next and final article, we’ll look at what investors should look out for during Freeport’s 4Q17 earnings call.

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