This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Do Strong Freeport Earnings Suggest Growth In Basic Materials?

This also comes at a time when the firm is actively reducing its capital expenditures (capex). Freeport wants to reduce capex by $1.9 billion this year. In the third quarter, capex was $1.6 billion.

Freeport expects capex to be $5.5 billion for 2013 with about a quarter of that to be spent on oil and gas operations (between June 1 and December 31 2013). That is a sizable portion, while projects at mining operations will cost $2.4 billion.

It's all about diversity

In an age when some commodity prices are fluctuating wildly, diversification is key. Since miners rely on high industrial output and construction to create a market for their goods – it's also important to pay attention where a company exports. One of the biggest miners in the world, Vale SA (VALE) exports almost half of its goods to China alone.

Click on the interactive chart to see data over time. 

Freeport’s diversification into oil and gas is starting to show signs of success. Revenue is higher compared to the previous year, and earnings are not as weak as investors feared. Freeport raised its debt levels, but has a healthy cash flow forecast that will likely be met to keep the balance sheet healthy. 

Bringing it all together

Investors already bid shares higher, pricing in the solid quarter and outlook. With the exception of Freeport, many miners are down this week. If prices continue to remain flat, or worse, fall – commodities companies could be in for a difficult year in 2014. And the short term fate Chinese economy will have a huge impact on share prices. 

Taken together, there are many intangibles that make raw material stocks look volatile right now. Investors may want to wait for a greater pullback before increasing positions in one of these companies. 

2 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG

Markets

Chart of I:DJI
DOW 17,689.86 -56.12 -0.32%
S&P 500 2,103.84 -4.79 -0.23%
NASDAQ 5,128.2810 -0.5040 -0.01%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs