Freeport (FCX) Up 23% in 6 Months: What’s Driving the Stock?

Shares of Freeport-McMoRan Inc. FCX have rallied 23.1% in the last six months, outperforming the industry’s gain of roughly 11.2%.

Freeport, a Zacks Rank #3 (Hold) stock, has a market cap of roughly $25.7 billion and average volume of shares traded in the last three months was around 19,502.8K.

Let’s take a look into the factors that are driving this mining company.

Driving Factors

Forecast-topping fourth-quarter 2017 earnings performance, progress in exploration activities to expand production capacity and efforts to reduce debt have contributed to the rally in Freeport’s shares.

The company’s reported net income (attributable to common stock) jumped more than three-folds to 71 cents per share in the fourth quarter from 21 cents recorded a year ago. Adjusted earnings of 51 cents a share also topped the Zacks Consensus Estimate of 49 cents.

Freeport’s results benefited from improving market conditions for copper, its focus on productivity along with cost and capital discipline. The company generated strong cash flows and continued to strengthen its balance sheet along with advancing several long-term projects.

For 2018, Freeport believes that its shareholders are well positioned to benefit from its global leadership position in copper, high-quality portfolio of geographically diverse assets and favorable copper market conditions.

The company anticipates consolidated sales volumes for 2018 to be roughly 3.9 billion pounds of copper, 2.4 million ounces of gold and 91 million pounds of molybdenum, including 1 billion pounds of copper, 675,000 ounces of gold and 24 million pounds of molybdenum for first-quarter 2018.

Freeport is conducting exploration activities near its existing mines with a focus to expand reserves that will support additional future production capacity.

Freeport’s actions to reduce debt should also boost its financial position. It has efficiently achieved its debt reduction objectives during 2016 and 2017 while retaining robust asset base for the future. During fourth-quarter 2017, the company repaid $1.7 billion debt and its total debt has also declined around 18.2% year over year to $13.1 billion at the end of 2017.

Recently, Freeport issued notices to redeem $454 million total principal amount of Freeport and Freeport-McMoRan Oil & Gas LLC senior notes on Apr 4. The move will result in total cash interest cost savings worth $30 million per year.

Also, last month, Freeport’s board reinstated a cash dividend on its common stock and plans to declare a quarterly dividend of 5 cents per share and expects an initial quarterly dividend to be paid on May 1. The move reflects Freeport’s execution of its plan to strengthen its financial position over the last two years. It is also driven by improved market conditions and a positive outlook for generating strong cash flows.

Stocks to Consider

Some stocks worth considering in the basic materials space are LyondellBasell Industries N.V. LYB, CF Industries Holdings, Inc. CF and Daqo New Energy Corp. DQ, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

LyondellBasell has an expected long-term earnings growth rate of 9%. Its shares have moved up 15.6% over a year.

CF Industries has an expected long-term earnings growth rate of 8%. Its shares have gained 23.6% over a year.

Daqo New Energy has an expected long-term earnings growth rate of 7%. Its shares have rallied 143.9% over a year.

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