NEW YORK (TheStreet) -- Freeport-McMoRan (FCX) shares are declining -2.5% to $37.58 after being downgraded to "neutral" from "buy" by analysts at Bank of America/Merrill Lynch (BAC), who lowered its price target to $40 from $43 on Thursday.
The decreased outlook is based on the continued negotiations between the mining company and the Indonesian government over progressive export taxes.
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TheStreet Ratings team rates FREEPORT-MCMORAN INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate FREEPORT-MCMORAN INC (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 revenue growth, attractive valuation levels and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and generally higher debt management risk."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- FCX's revenue growth has slightly outpaced the industry average of 4.5%. Since the same quarter one year prior, revenues slightly increased by 8.8%. 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.
- Compared to its closing price of one year ago, FCX's share price has jumped by 36.96%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
- 45.90% is the gross profit margin for FREEPORT-MCMORAN INC which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 10.23% trails the industry average.
- FREEPORT-MCMORAN INC's earnings per share declined by 27.9% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, FREEPORT-MCMORAN INC reported lower earnings of $2.64 versus $3.18 in the prior year. For the next year, the market is expecting a contraction of 3.6% in earnings ($2.55 versus $2.64).
- 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 21.3% when compared to the same quarter one year ago, dropping from $648.00 million to $510.00 million.
- You can view the full analysis from the report here: FCX Ratings Report