Freeport-McMoRan Inc. FCX reported net income (attributable to common stock) of 47 cents per share for first-quarter 2018 compared with 16 cents recorded a year ago.

Barring one-time items, adjusted earnings came in at 46 cents a share in the quarter, missing the Zacks Consensus Estimate of 58 cents.

Revenues went up around 45.7% year over year to $4,868 million. Also, the figure surpassed the Zacks Consensus Estimate of $4,759.9 million.

Consolidated sales from mines totaled 993 million pounds of copper, 610,000 ounces of gold and 24 million pounds of molybdenum in the first quarter. Copper sales volume rose 22.7% year over year, mainly reflecting higher operating rates in Indonesia.

According to the company, first-quarter results highlight strong cash flows, advancement of initiatives to create shareholders value and continued strengthening of its financial position.

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 of 98 cents per pound of copper were lower than $1.39 reported in the year-ago quarter, mainly highlighting higher by-product credits and sales volumes.

Average realized price for copper was $3.11 per pound, up from $2.67 a year ago. Average realized price per ounce for gold rose to $1,312 from $1,229 a year ago, while average realized price per pound for molybdenum was $11.95 per pound.

Mining Update

North America Copper Mines: Copper sales increased 2.4% year over year to 384 million pounds, mainly reflecting timing of shipments. Production fell 11.2% to 348 million pounds.

Freeport expects copper sales from North America to be 1.5 billion pounds in 2018.

South America Mining: Copper sales of 290 million pounds decreased 6.1% from the year-ago quarter.

Freeport expects South America mining to report sales of around 1.2 billion pounds of copper in 2018.

Indonesia Mining: Copper sales of 319 million pounds significantly rose from 125 million pounds in the year-ago quarter.  

Gold sales increased to 603,000 ounces from 177,000 ounces a year ago while production rose nearly three-folds to 595,000 ounces in the first quarter.

Per Freeport, sales from Indonesia mining are anticipated to be about 1.15 billion pounds of copper and 2.4 million ounces of gold for 2018 compared with 1 billion pounds of copper and 1.5 million ounces of gold for 2017.

Molybdenum Mines: Molybdenum production was 9 million pounds in first-quarter 2018 compared with 8 million pounds in the year-ago quarter.

Financial Position

Freeport’s operating cash flows totaled roughly $1.4 billion in the quarter, which include $21 million in working capital and changes in other tax payments.

The company had total debt of $11,606 million as of Mar 31, 2018, down from $15,363 million as of Mar 31, 2017.

Guidance

Freeport anticipates consolidated sales volumes for 2018 to be roughly 3.8 billion pounds of copper, 2.4 million ounces of gold and 95 million pounds of molybdenum, including 970 million pounds of copper, 700,000 ounces of gold and 24 million pounds of molybdenum for second-quarter 2018.

For 2018, the company expects operating cash flows to be roughly $5.6 billion (including $0.2 billion in working capital and other tax payments). Capital expenditures are expected to be around $2 billion, which includes $1.1 billion for major mining projects mainly related to underground development in the Grasberg and the Lone Star oxide project.

Freeport had no borrowings, $13 million in letter of credit issued and $3.5 billion available under its revolving credit facility as of Mar 31, 2018.
 
Price Performance

Freeport’s shares have lost 5.1% over the past three months, underperforming the industry’s 4.2% decline.


 

Zacks Rank & Stocks to Consider

Freeport currently carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the basic materials space include Steel Dynamics, Inc. STLD, United States Steel Corporation X and Kronos Worldwide Inc. KRO, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Steel Dynamics has an expected long-term earnings growth rate of 12%. Its shares have soared 25.8% over a year.

U.S. Steel has an expected long-term earnings growth rate of 8%. Its shares have gained 17.4% over the past six months.

Kronos has an expected long-term earnings growth rate of 5%. Its shares have rallied 41% over a year.

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