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Does Freeport-McMoRan Stock Look Attractive after the Sell-Off?

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Freeport-McMoRan

Freeport-McMoRan (FCX), the leading US-based copper miner (DIA), fell 13.1% yesterday after its fourth-quarter earnings release. The stock has fallen 14.8% this week, but it’s still up 3.8% so far this year. 

Freeport missed consensus estimates for both its top and bottom line results in the fourth quarter.

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Fourth-quarter earnings

Freeport reported revenue of $3.7 billion in the fourth quarter compared to $4.9 billion in the third quarter and $5.0 billion in the fourth quarter of 2017. Freeport’s adjusted EBITDA also fell to $885 million in the quarter. It posted adjusted EBITDA of $1.8 billion in the previous quarter.

Lower-than-expected shipments were the key driver of Freeport’s fourth-quarter earnings miss. While its copper shipments were only marginally lower than what it guided for on its third-quarter earnings call, its gold shipments were almost 20% lower than its guidance. Freeport’s unit cash costs were also higher than its guidance, as its gold volumes were lower than expected.

In an earlier series, we had noted that Freeport’s margin of safety looks to be lower following its sharp rise from its December lows. Copper prices (SCCO) are still languishing below $6,000 per metric ton. The key question here is whether Freeport’s sell-off presents a buying opportunity. We’ll explore this prospect in detail in the coming articles.

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