What's In Store For Freeport (FCX) This Earnings Season?
Zacks Investment Research | Jul 20, 2017 10:49PM ET
Freeport-McMoRan Inc. (NYSE:FCX) is set to release second-quarter 2017 results ahead of the bell on Jul 25.
Last quarter, the mining company reported a negative earnings surprise of 11.76%. Freeport missed the Zacks Consensus Estimate in all of the trailing four quarters with an average negative surprise of 41.30%.
Freeport’s shares have declined 17.1% in the last six months versus the 0.9% growth of its industry.
Let’s see how things are shaping up prior to this announcement.
Factors at Play
Freepost, in last earnings call, revised its annual guidance and the company now anticipates sales volumes for 2017 to be roughly 3.9 billion pounds of copper (down from 4.1 billion pounds expected earlier), and1.9 million ounces of gold (down from 2.2 million ounces expected earlier). Freeport expects to produce 93 million pounds of molybdenum, including 1 billion pounds of copper, 440,000 ounces of gold and 24 million pounds of molybdenum in second-quarter 2017. Estimated sales volumes assumed normal operating rates at PT-FI beginning mid-Apr 2017.
The company assumes that the average prices of gold and molybdenum to be $1,250 per ounce and $9 per pound for the balance of 2017.
Lingering uncertainties surrounding the Grasberg mine in Indonesia is weighing on the company's stock. Freeport’s copper sales volumes in Indonesia slid 28% in the first quarter, hurt by regulatory restrictions on PT Freeport Indonesia’s (PT-FI) concentrate exports since mid-Jan 2017. Gold sales volumes also fell in the quarter. Although PT-FI has resumed exports, Freeport cut its copper and gold sales volume guidance for 2017, partly due to the impact of the suspension of exports in Indonesia. Freeport has also reduced its Indonesia workforce by 10% and cut investments in the Grasberg underground expansion.
The uncertain copper pricing environment represents another concern. Freeport’s average realized copper prices fell roughly 6% in 2016. While copper prices have enjoyed a healthy run so far in 2017, prices are expected to remain under pressure in the second half of the year on concerns over an economic slowdown in China. Moreover, uncertainty regarding inventory levels may also cause fluctuations in copper pricing.
Concerns over a possible economic slowdown in China (a major market for copper) add to the woes. China’s move to tighten credit growth could hurt demand for copper in its property and infrastructure sectors. Chinese copper demand growth is expected to moderate on a year over year basis in 2017.
Freeport-McMoran, Inc. Price and EPS Surprise
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