Copper fell 2.49% to $2.56 at 1:15 p.m. on the COMEX in New York. West Texas Intermediate also continued to fall today, down 2.07% to $42.56.
Copper hit a three-week low on Wednesday on poor prospects in top consumer China and ahead of a Federal Reserve meeting expected to lay the groundwork for an increase to U.S. interest rates, Reuters reports. Oil continued its decline amid an ongoing global oversupply.
Separately, the natural resources conglomerate has reportedly hired Goldman Sachs Group (GS) - Get Report and Barclays (BCS) - Get Report to help find private equity firms that will finance some of its projects, sources told Reuters.
Two years ago the company acquired Plains Exploration & Production Co (PXP) and McMoRan Exploration Co (MMR) for $19 billion, including debt, as the company sought to diversify its copper sector exposure with assets in the U.S. energy industry.
Now, as crude oil has fallen to near six-year lows, the move is weighing on the company, with less cash being generated from the oil and gas operations to fund current mining activities and financing for the acquired assets becoming more challenging.
TheStreet Ratings team rates FREEPORT-MCMORAN INC as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:
"We rate FREEPORT-MCMORAN INC (FCX) a SELL. This is driven by some concerns, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, generally high debt management risk, disappointing return on equity, weak operating cash flow and generally disappointing historical performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- 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 significantly decreased by 503.4% when compared to the same quarter one year ago, falling from $707.00 million to -$2,852.00 million.
- The debt-to-equity ratio of 1.04 is relatively high when compared with the industry average, suggesting a need for better debt level management. To add to this, FCX has a quick ratio of 0.59, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Metals & Mining industry and the overall market on the basis of return on equity, FREEPORT-MCMORAN INC underperformed against that of the industry average and is significantly less than that of the S&P 500.
- Net operating cash flow has significantly decreased to $1,118.00 million or 53.33% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, FREEPORT-MCMORAN INC has marginally lower results.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 38.61%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 504.41% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- You can view the full analysis from the report here: FCX Ratings Report