Commodities & Metals
What Saved Freeport-McMoRan's Q2 Earnings
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On the face of it, shares of copper and gold miner Freeport-McMoRan Inc. (NYSE: FCX) should be trading down about 2.5% after the company’s Tuesday night earnings report. Instead the shares have been trading higher all day Wednesday and touched an intraday high of of $13.59, up around 7%.
The company reported an adjusted net loss per share of $0.02, compared with a consensus estimate for a loss of half that size. Revenues totaled $3.33 billion, down from $3.94 billion a year ago and below a consensus estimate of $3.7 billion. Operating cash flow also dipped year over year, from $1.07 billion to $874 million.
Freeport’s average realized price per pound of copper fell by $0.53, and net cash costs per pound fell by $0.17 to $1.33. Gold prices rose from $1,174 per ounce in the year-ago quarter to $1,292. Oil production fell from 144,000 barrels of oil equivalent per day to 136,000 and the operating margin fell from $31 per barrel to $17.70. A mixed bag at best.
The good news is that Freeport was able to knock more than $1.6 billion from its total debt with more to come. At the end of the quarter the company had agreed to sell assets worth about $4.4 billion. The company also cancelled some offshore rig contracts during the quarter and paid the penalties by issuing more shares. The company also plans an at-the-money sale of $1.5 billion in new shares to further reduce debt, and further asset sales are not anticipated.
CEO Richard Adkerson said:
Our announced asset sale transactions totaling over $4 billion year-to-date demonstrate the attractiveness of our high-quality asset base. We are focused on executing our operating plans, which position us for significant free cash flow generation in the balance of 2016 and 2017, and on building long-term values from our portfolio of low-cost, long-lived reserves and resources for the benefit of our shareholders.
In mid-afternoon trading Wednesday shares traded around $12.93, up nearly 2% for the day in a 52-week range of $3.52 to $14.20. The consensus 12-month price target on the stock is $11.80.
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