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Freeport (FCX) Tops Earnings, Revenue Estimates in Q3

Freeport-McMoRan Inc. FCX reported net income (attributable to common stock) of 19 cents per share for third-quarter 2017, compared with 16 cents recorded a year ago.

Barring one-time items, adjusted earnings were 34 cents a share in the third quarter, beating the Zacks Consensus Estimate of 29 cents.

Revenues went up around 11.2% year over year to $4,310 million in the reported quarter, surpassing the Zacks Consensus Estimate of $4,104.1 million.

Consolidated sales from mines totaled 932 million pounds of copper, 355,000 ounces of gold and 22 million pounds of molybdenum for the reported quarter. Copper sales volumes were lower than the year-ago figure, which mainly reflects lower ore grades in Indonesia and North America and the timing of shipments. In contrast, gold sales were higher year over year on higher ore grades from Indonesia.

According to the company, focus on cost management along with free cash flow generation has enabled it to strengthen balance sheet and successfully execute strategies. It also gained from higher copper prices in the reported quarter.  

Freeport-McMoran, Inc. Price, Consensus and EPS Surprise

 

Freeport-McMoran, Inc. Price, Consensus and EPS Surprise | Freeport-McMoran, Inc. Quote

Operational Update

Consolidated average unit net cash costs increased to $1.21 per pound of copper from $1.14 in the year-ago quarter, mainly due to reduced copper sales volumes.

Average realized price for copper was $2.94 per pound, up from $2.19 a year ago. Average realized price per ounce for gold fell to $1,290 in the quarter from $1,327 a year ago, while average realized price per pound for molybdenum was $9.22 per pound.

Mining Update

North America Copper Mines: Copper sales decreased 24.2% year over year to 347 million pounds mainly due to lower ore grades and timing of shipments. Production fell 17.6% year over year to 375 million pounds in the reported quarter.

Freeport expects copper sales from North America to be 1.5 billion pounds in 2017, compared with the year-ago figure of 1.8 billion pounds.

South America Mining: Copper sales of 327 million pounds increased 1.2% from the year-ago quarter.

South America mining is anticipated to report sales of around 1.2 billion pounds of copper in 2017, compared with sales of 1.3 billion pounds in 2016.

Indonesia Mining: Copper sales of 258 million pounds declined 22.3% from 332 million pounds the year-ago quarter. The results mainly reflect lower copper ore grades and timing of shipments.

Gold sales surged 14.7% to 352,000 ounces and production rose 36.9% year over year to 412,000 ounces in the reported quarter.

Sales from Indonesia mining are anticipated to be about 1 billion pounds of copper and 1.6 million ounces of gold for 2017.

Molybdenum Mines: Molybdenum production was 8 million pounds in the third quarter compared with 5 million pounds in the year-ago quarter.

Financial Position

Freeport had operating cash flows of roughly $1.2 billion in the quarter, which includes $45 million in working capital and changes in other tax payments.

Freeport had total debt of $14,782 million as of Sep 30, 2017, down from $18,882 million as of Sep 30, 2016.

Guidance

For 2017, Freeport expects operating cash flow and capital expenditures to be around $4.3 billion and $1.5 billion, respectively.

Freeport anticipates sales volumes for 2017 to be roughly 3.7 billion pounds of copper, 1.6 million ounces of gold and 94 million pounds of molybdenum, including 1 billion pounds of copper, 625,000 ounces of gold and 23 million pounds of molybdenum for fourth-quarter 2017. 

The company assumes average prices of $1,300 per ounce of gold and $8per pound of molybdenum for fourth-quarter 2017.

Consolidated unit net cash costs (net of by-product credits) for copper mines are expected to average $1.19 per pound of copper for 2017. 

The company has also made progress in active negotiations with Indonesian government regarding its long-term operating rights and it remains focused on managing long-term business for shareholders.

Price Performance

Freeport’s shares have moved up 44.3% over a year, outperforming the industry’s 41.7% growth.

 

Zacks Rank & Key Picks

Freeport currently carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the basic materials space are Air Products and Chemicals, Inc. APD, Cabot Corporation CBT and Westlake Chemical Corporation WLK. All three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks Rank #1 stocks here.

Air Products has an expected long-term earnings growth rate of 12.1%.

Cabot has an expected long-term earnings growth rate of 10.7%.

Westlake Chemical has an expected long-term earnings growth rate of 8.3%.

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