NEW YORK (TheStreet) -- Shares of Freeport-McMoRan (FCX) - Get Report slumped 2.9% to $18.77 in pre-market trading today after the miner cut its quarterly dividend to 5 cents a share from $0.3125 cents a share, citing "volatile market conditions."
"The reduction in the dividend is a prudent measure to strengthen our balance sheet during a period of volatile market conditions. As previously announced, our plans include significant reductions in capital spending and other costs and we are evaluating funding opportunities for capital expenditures in our oil and gas business," the company's executive management said.
Phoenix-based FCX is a natural resources company with global portfolio of mineral assets, significant oil and gas resources and a growing production profile. FCX is the world's largest publicly traded copper producer.
The company has significant energy exposure as two years ago it acquired Plains Exploration & Production Co (PXP) and McMoRan Exploration Co (MMR) for $19 billion, including debt, seeking to diversify its copper operations with assets in the U.S. energy industry.
Separately, a five-day blockade by workers at Freeport-McMoRan's Indonesian mine ended on Saturday and normal operations were being resumed at the Grasberg site, a spokeswoman for the company told Reuters.
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 several weaknesses, 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 44.45%, 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