Freeport-McMoRan Inc (NYSE:FCX) missed earnings on the top and bottom, yet FCX stock is up 3% this morning anyway as investors buy the news.
FCX reported net income of $217 million, which comes to a per-share total of 16 cents. On average, analysts expected 18 cents. Still, that’s better than the 15-cent loss it posted in the year-ago quarter.
Revenue of $3.88 billion also came in lower than the $3.95 billion the Street hoped for, but again, it was better than the $3.38 billion posted a year ago.
As for commodities, FCX saw consolidated sales of 1.2 billion pounds of copper (6% lower than July estimates, but higher YoY), 317 ounces of gold (about 22% lower than July estimates; also higher YoY), 16 million pounds of molybdenum (20% lower than July forecasts) and 12 million barrels of oil and equivalents (higher than the 11.4 MMBOE projected, but lower YoY).
Of these, Freeport realized prices of $2.18 per pound for its copper, $1,327 per ounce for gold and $40.63 per oil barrel. But with $19 billion in debt, FCX is still in an uncomfortable position. FCX President and CEO Richard C. Adkerson had this to say:
“Our actions during 2016 position us to achieve our objectives of restoring our balance sheet strength and focusing our strategy on our industry leading portfolio of high quality, long-lived copper assets. Our announced asset sale transactions totaling $6.6 billion combined with significant free cash flow generation in the coming quarters will enable us to achieve our debt reduction targets. Our global team continues to execute our cost and capital management initiatives during a period of weak copper prices in a manner that protects the long-term values of our large resources. We remain focused on completing our announced transactions, executing our operating plans and building long-term values from our portfolio of low-cost, long-lived reserves and resources for the benefit of our shareholders.”
Basically, FCX is trying to tame its debt load by selling assets and increasing operational cash flow. Just last month, Freeport announced the sale of its Deepwater Gulf of Mexico properties for $2 billion and as much as $150 million in contingent payments. This month, FCX agreed on $592 million and another $150 million in contingent payments for its onshore California oil and gas properties, and it has a few other pending transactions.
What’s more, the company is leaning on copper to get by until market conditions stabilize. To do this, FCX is implementing new mine designs that it hopes will increase its copper reserves and reduce costs.
After an initial pop that sent FCX stock up around the $11 mark, shares of Freeport-McMoRan Inc have settled to around a 3% gain at $10.50 after investors digest the first quarterly profit in seven quarters.
As of this writing, John Kilhefner did not hold a position in any of the aforementioned securities.
