Freeport McMoRan (FCX) - Get Report shares fell Thursday, after the copper- and gold-mining giant reported that it about broke even in the fourth quarter while adjusted profit and revenue exceeded expectations.
Morgan Stanley said in a report that the first-quarter sales outlook for FCX "looks light." And J.P. Morgan's analyst said that in 2020, the company's capital-spending will be higher than the company previously guided, and estimated cash costs to produce copper are higher than the analyst expected.
The Phoenix company reported adjusted earnings of 2 cents a share for the quarter, down from 11 cents in the year-earlier quarter. Analysts surveyed by FactSet had forecast break-even on an adjusted basis as well.
Sales reached $3.91 billion in the latest quarter, up 6.2% from $3.68 billion in the year-earlier quarter. Analysts had estimated $3.7 billion, FactSet showed.
CEO Richard Adkerson emphasized the positive. The company made progress on three major initiatives last year, he said.
-- "We are on schedule to establish large-scale production from our high-grade, low-cost and long-lived underground ore bodies at Grasberg," Indonesia; the project produces copper and gold;
-- “The Lone Star [copper] project in Arizona is nearing completion;
-- “And early results from our innovation initiatives to enhance productivity at our operations in the Americas are positive.”
These projects will “strengthen our cost position [and] cash flows …,” Adkerson said.
The company hopes to increase copper and gold sales by more than 30%, reduce unit net cash costs by some 25% and more than double operating cash flows in 2021 from 2019.
As for 2020, Freeport estimated copper sales of 3.5 billion pounds for the year and gold sales of 800,000 ounces.
At Morgan Stanley, analyst Carlos De Alba said in a report that the “first-quarter outlook looks light.”
The company expects the period’s sales to total 725 million pounds of copper versus Morgan Stanley’s estimate of 850 million pounds; 105,000 ounces of gold against the firm’s view of 205,000; and 22 million pounds of molybdenum, 1 million pounds shy of MS’s estimate.
De Alba rates Freeport-McMoRan stock overweight with a $13.60 price target.
At J.P. Morgan analyst Michael Gambardella noted FCX estimated capital expenditure at $2.8 billion for this year compared with its previous estimate of $2.6 billion.
And net cash costs of copper should average $1.75 a pound, roughly flat with 2019's $1.74 but above J.P. Morgan's estimate of $1.63.
Gambardella pegs FCX at neutral with a $15 target.
The company’s stock at last check stood at $11.48, down 6.7%. It has slid 8% over the past year, compared with a 25% increase for the S&P 500 index