Tag Archives: NYSE:FCX

Freeport-McMoRan: Zacks’ Bear of the Day Play

Freeport-McMoRan Inc. (FCXAnalyst Report) can’t hide from the crash in commodity prices. This Zacks Rank #5 (Strong Sell) recently slashed its dividend by 84% in order to conserve cash.

Freeport-McMoRan is one of the largest copper and gold producers in the world but in 2013, in a controversial move, it expanded its commodities portfolio into energy and now has oil and natural gas assets in North America, including in the Deepwater of the Gulf of Mexico, onshore and offshore California and in the Haynesville shale.

Dividend Cut

Even while its shares slid, Freeport-McMoRan had been paying one of the juiciest dividends in the industry at 6.80%.

But on March 24, the company announced that it was cutting the dividend by 84% to $0.05 per share from $0.3125 per share payable on May 1, 2015 to shareholders of record as of April 15 in order to conserve its cash.

It was the first dividend cut since it suspended the dividend completely during the financial crisis in 2008. Once the crisis abated, it resumed the dividend.

In 2013, the company paid $9 billion in cash and stock to acquire Plains Exploration & Production and McMoRan Exploration. Energy is now approximately 25% of revenue.

But with crude prices crashing, so has revenue.

The company is also cutting capital expenditures in the oil and gas business to strengthen the balance sheet.

Earnings Estimates Slashed for 2015 and 2016

Not surprisingly, given weaker commodities prices, the analysts have been busy cutting full year estimates.

14 estimates have been cut for 2015 and 10 have slashed for 2016 in the last 60 days.

Over the last 3 months, the Zacks Consensus Estimate for 2015 has sunk to $0.99 from $2.23.

That’s an earnings decline of 49.4% compared to 2014 when the company earned $1.96.

This price and consensus chart is what you don’t want to see as an investor. Earnings are going the wrong way. They’re going down.

Shares Still Not Cheap

Freeport’s shares have plunged 41% in the last year.

But because earnings are also being lowered at a similarly quick pace, the shares aren’t cheap.

Freeport still trades with a forward P/E of 19. That’s still above the average of the S&P 500 which is trading at 17.5. And no one is talking about how cheap the S&P 500 is these days either.

The commodities companies are in a tight place right now.

If you insist on owning one, you might want to focus on the aluminum producers like Alcoa Inc. (AAAnalyst Report). It’s trading with a forward P/E of just 11.5, so it actually IS cheap, and is expected to grow earnings by 19.5% this year. It’s a Zacks Rank #3 (Hold).

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Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the Insider Trader and Value Investor services. You can follow her on twitter at @TraceyRyniec.


Freeport McMoran; Zacks’ Bear of the Day Play

Snakebit: adjective \-,bit\ – having bad luck: very unlucky

You can add another definition to the word snakebit here, and it’s not the phrase “Bear of the Day” which this snakebit stock is. No, you only need to add the company name, Freeport McMoran Copper & Gold (FCX). As if it wasn’t bad enough to be a gold miner over the course of the last couple of years, FCX tried, in vain, to hedge its metals exposure by getting into another very popular commodity. Unfortunately for FCX when it chose to diversify away from gold and copper into oil, it did so when Brent was at $109 and West Texas was at $86. In case you haven’t been paying much attention as of late, oil is trading in the $40s.

Surprising to some may be the fact that gold has been staging a bit of a rally in the face of all this. While the US dollar continues to flex its muscle and bring the commodities space to its knees, the base metal has begun to creep up slowly. But the increase in gold’s price has yet to be reflected in analysts’ opinions of Freeport.

Quite the opposite actually as over the last 60 days, ten analysts have dropped their estimates for the current year while only a single analyst has pushed higher. The activity has helped to suppress consensus estimates down to $1.85 from the lofty expectations for $2.65. The story next year looks very similar as well. Six analysts have brought estimates down, helping consensus dip down to $3.78 from expectations of $5.08 just 90 days ago. The recent quarterly miss isn’t doing much to bolster the stock either. FCX came in 25 cents per share for the quarter ending 12/2014, 10 cents shy of the Zacks Consensus at 35 cents.

As you can imagine, traders haven’t been nice to FCX. After reaching a 52-week high of $39.32 in July 2014 FCX ran out of buying momentum. After stochastic switched from overbought ahead of the high, there was a bearish cross then a subsequent drop below the 25 day moving average shifted by 5 days (25×5). Since that first dip below, FCX has only managed to pop above the 25×5 on November 21st, but couldn’t manage to stay above it for more than a few days. Now you’ve got an extremely oversold FCX that’s dragging its knuckles down at $17.42, off 63% from the highs just a few months ago.

Investors looking to gain more exposure to the metals and mining industry should take a closer look at Zacks Rank #2 (Buy) stocks Alcoa (AAAnalyst Report) and Thompson Creek (TCSnapshot Report).