NEW YORK (TheStreet) -- Shares of Freeport-McMoRan (FCX) are sinking, down 2.57% to $26.16 Monday morning, as the natural resources company is nearing a more than $100 million settlement to resolve allegations by its shareholders concerning its 2013 purchase of McMoRan Exploration and Plains Exploration & Production, the Wall Street Journal reports.
Shareholders of Freeport-McMoRan have reportedly alleged that the mining company's board and executives overpaid for its $9 billion purchase of the two oil-and-gas companies, saying the acquisitions were aimed at rescuing the struggling McMoran Exploration, in which Freeport held shares, the Journal added.
Phoenix, AZ-based Freeport-McMoRan acquired McMoRan Exploration for $2.1 billion, and also acquired Plains Exploration & Production for about $6.9 billion.
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Separately, 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 reasonable valuation levels, good cash flow from operations and expanding profit margins. 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:
- Net operating cash flow has slightly increased to $1,926.00 million or 2.55% when compared to the same quarter last year. In addition, FREEPORT-MCMORAN INC has also vastly surpassed the industry average cash flow growth rate of -55.16%.
- 39.80% is the gross profit margin for FREEPORT-MCMORAN INC which we consider to be strong. Regardless of FCX's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 9.69% trails the industry average.
- FREEPORT-MCMORAN INC's earnings per share declined by 32.9% 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 17.8% in earnings ($2.17 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 significantly decreased by 32.8% when compared to the same quarter one year ago, falling from $821.00 million to $552.00 million.
- You can view the full analysis from the report here: FCX Ratings Report