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Consumer discretionary

Freeport-McMoRan Inc Missed Q3 Estimates, but the Stock Still in Green

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We explain why Freeport stock is soaring higher

Freeport-McMoRan Inc. (NYSE:FCX) recently reported its earnings results for 3Q 2016, and the results were below the analysts’ expectations. Despite that, the stock has remained resilient and has surged by around 7.47% since its earnings results.

The company’s profitability amounted to $217 million, or Earnings per Share (EPS) of $0.16, which was much better than loss of $3.83 billion on Year-over-Year (YoY) basis. Moreover, the revenues for the company increased from $3.38 billion to $3.88 billion on YoY basis.

The company’s 3Q showed an increase in the level of production. On YoY basis, the copper and gold production for the quarter increased by 23% and 7.8%, respectively to 1.23 billion pounds and 317,000 ounces. Despite the increase, the output fell short of analyst’s estimates of 1.3 billion pounds of copper and 410,000 ounces of gold, respectively.

Despite missing the analysts’ estimates, the company did benefit from the gold prices increase by 20% on YoY basis. The realized prices for gold in the 3Q amounted to $1,327 per ounce which was higher by around 18.8% as compared to the same period a year ago.

Moreover, despite of missing analyst’s expectations for revenue and estimates, the company announced a substantial surge in its earnings and profitability, which we think is the factor increasing investors’ confidence in Freeport-McMoRan, and pushing stock price higher.

Also, the debt burden, one of the biggest concerns for investors, was also cooled down. The debt burden declined from around $20 billion to just below $19 billion, which signifies that the company is making improvement in terms of its debt burden. Freeport-McMoRan is still planning to dispose of further assets in the future which would additionally help in lowering debt burden, and improve its liquidity position.

Also, the company is generating sufficient amount of cash flows which are easily able to cover its Capital Expenditure and further raise investors’ confidence. All in all, the company is slowly improving its performance, and could be a good bet going forward.

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