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Why Freeport McMoRan Copper & Gold (FCX) Is Down Today (Update)

Stocks in this article: FCX

Update (4:23 p.m.): Updated with Friday market close information.

NEW YORK (TheStreet) -- Freeport-McMoRan Copper & Gold  (FCX) dipped 4.85% to $32.19, down $1.64 from its previous close of $33.83, at the close of the trading day on Friday after the Democratic Republic of the Congo, the largest copper producer in Africa, announced to miners that it would start an electricity-rationing program and that its state-run power company would cease signing new contracts.

The restrictions are due to a power shortage in the nation that will take years to solve, according to BusinessWeek. Freeport-McMoRan said Friday that the rationing should not affect its short-term operations, specifically the enormous Tenke Fungurume Mining project in Katanga, but future expansion plans would need a stable energy supply, according to Reuters.

"There is currently sufficient power available for TFM to run its operations," Freeport-McMoRan spokesman Eric Kinneburg said in an email to Reuters. "We have experienced intermittent outages over the last several months and have been working with authorities to resolve the issues."

Kinneburg also said TFM plans invest approximately $220 million to obtain stable power. The company has started to refurbish four turbines at a local hydropower station, he told Reuters.

The stock nearly doubled its average volume of 10,946,100, as 20,011,873 shares changed hands on Friday. It hit a high of $33.46 and a low of $32.03 for the day; the stock holds a one-year high of $38.09 and a one-year low of $26.37.

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TheStreet Ratings team rates FREEPORT-MCMORAN COP&GOLD as a "hold" with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate FREEPORT-MCMORAN COP&GOLD (FCX) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and feeble growth in the company's earnings per share."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 8.5%. Since the same quarter one year prior, revenues rose by 30.4%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Net operating cash flow has significantly increased by 84.74% to $2,337.00 million when compared to the same quarter last year. In addition, FREEPORT-MCMORAN COP&GOLD has also vastly surpassed the industry average cash flow growth rate of -35.16%.
  • The gross profit margin for FREEPORT-MCMORAN COP&GOLD is rather high; currently it is at 50.50%. It has increased significantly from the same period last year. Regardless of the strong results of the gross profit margin, the net profit margin of 12.01% trails the industry average.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. When compared to other companies in the Metals & Mining industry and the overall market, FREEPORT-MCMORAN COP&GOLD's return on equity has significantly outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Metals & Mining industry. The net income has decreased by 4.8% when compared to the same quarter one year ago, dropping from $743.00 million to $707.00 million.
  • You can view the full analysis from the report here: FCX Ratings Report

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Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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