What to expect this year

As we noted in the previous article, Freeport-McMoRan (FCX) witnessed a selling spree after its fourth-quarter earnings release. Its earnings miss was primarily the result of the timing of its sales, as its fourth-quarter gold shipments were lower than its production.

Generally, an earnings miss due to shipment timing might not spook markets the way we saw after Freeport’s earnings miss. However, several other aspects, especially in Freeport’s 2019 guidance, are concerning.

Why 2019 Looks to Be a Tough Year for Freeport-McMoRan

2019 guidance

Looking at Freeport’s cash flow guidance, the company could be cash flow negative this year if copper prices average $2.75 per pound. The company’s EBITDA is also expected to fall to $4.0 billion in 2019 before rising to $4.95 billion in 2020.

Even these consensus earnings estimates look elevated considering the current dynamic. Freeport expects its EBITDA to average ~$4 billion in 2019–2020 if copper prices average $3.0 per pound and gold prices average $1,300 per ounce. Currently, both these commodities are below the price level that Freeport has assumed in its guidance.


Copper is known for its supply uncertainty, and even a small supply-side issue could be enough to support copper prices (ANTO) (XME). However, currently, there are concerns about China’s demand outlook. The country’s copper imports fell on a yearly basis in November and December. China’s economic indicators also show a softening demand that’s bearish for copper markets.

Copper bulls seem to be banking too heavily on the projected supply deficit amid the demand surge related to electric vehicles. However, while vehicle electrification is a long-term story, in the short term, copper is quite vulnerable to China’s slowdown and geopolitical tensions.

To sum it up, 2019 looks to be a challenging year for Freeport considering the transition at Grasberg and subdued copper prices. With that said, it’s not exactly the end of the road for Freeport, as we’ll discuss in the next article.

Latest articles

Broadcom (AVGO) stock fell ~8.5% after markets closed yesterday following the semiconductor giant's fiscal 2019 second-quarter earnings release. It missed analysts' revenue estimate and cut its fiscal 2019 revenue guidance by $2 billion to $22.5 billion due to sluggishness in its semiconductor solutions business.

The SPDR Gold Shares ETF (GLD), which tracks physical gold prices, has underperformed the broader markets year-to-date, rising just 4.4% compared to the S&P 500’s (SPY) gain of 15.9% as of June 14. The sentiment for gold, however, has been turning around.

Safe havens such as Treasuries and gold were back in favor on June 14 as stocks fell due to rising tensions in the Middle East, concerns over growth, and the looming threat of the US-China trade war. The tech-heavy Nasdaq Composite Index fell 0.67% in the first hour of trading.

Lululemon (LULU) stock rose 2.1% on June 13 in reaction to better-than-expected first-quarter results and an upgraded outlook for fiscal 2019 overall. The company's first-quarter adjusted EPS grew 34.5% to $0.74 on revenue growth of 20.4% to $782.32 million. Analysts had expected EPS of $0.70 and revenue of $755.31 million. Here's why the outlook got an upgrade.

14 Jun

IEA Again Slashes Its Oil Demand Growth Estimate

WRITTEN BY Rabindra Samanta

As of 4:40 AM Eastern Time today, US crude oil active futures were at $51.83, ~4% below their closing level in the previous week. If US crude oil prices stay at those levels today, they'll mark their third week of decline in five weeks.

Amazon is discontinuing its Amazon Restaurants service, which has been delivering food for restaurants in parts of the United States. Amazon Restaurants launched in the United States in 2015 and entered the British market the following year. However, it met strong opposition in the British market.