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Actionable news in FCX: FreePORT-MCMORAN Inc,

Freeport-McMoRan Could Miss Q1 Earnings

Summary

Copper is a commodity with a heavily uncertain NTM price, thus creating significant future volatility for FCX.

Major divestments that occurred in Q1 will not be showing up on the Q1 earnings report, so investors should curb their optimism.

Further asset impairments will stifle this company's ability to grow and further reduce an already diluted bottom line.

Freeport-McMoRan (NYSE:FCX) is a stock that investors need to be cautious on, especially with the Q1 earnings report next Tuesday. While the company is now more focused on strengthening their balance sheet, which is a positive development, shareholders need to recognize how highly negative the operating environment was in Q1 and the effect it has on the upcoming earnings report, which will likely lead to a miss.

Source: Freeport-McMoRan

Backing Up

Commodities, including copper, have significantly rallied out of their February lows and really finished Q1 strong. On top of that, Freeport was the beneficiary of a new position by David Tepper of 3.6 million shares and was the beneficiary of an increased stake by none other than Carl Icahn. Additionally, short covering has significantly helped fuel the rally. On January 29, 222 million shares were short and now just 144 million remain short. That's a 35.14% decrease in the amount of shorts. Below you can see the positive reaction in FCX's stock.

Source: Bloomberg

Capex Cut Will Lead To A Delayed Recovery

As I've stated numerous times on Seeking Alpha, I look for companies with significant potential to grow. If possible, I look for these types of companies to have growing, but sustainable dividends.

Freeport's capex is down 29% from mid-2015 and will retract 47% in 2017. These cuts were necessary, in my opinion, otherwise cash flow would have seen significantly worse adverse effects. Interestingly enough, although the company...


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