Freeport-McMoRan Copper & Gold
) is slated to report its second-quarter 2012 results on Thursday,
July 19. The Zacks Consensus Estimate for earnings for the quarter
is 82 cents a share, representing an estimated year-over-year
decline of 44.92%.
With respect to earnings surprises, Freeport has outperformed
the Zacks Consensus Estimate in three of the trailing four quarters
while missing the same in one quarter. The Arizona-based company
has delivered an average positive earnings surprise of 6.76% over
the past four quarters, implying that it has beaten the Zacks
Consensus Estimate by that measure.
First Quarter Highlights
Freeport-McMoRan reported a profit of $913 million or 96 cents
per share in the first quarter of 2012, a 39% drop from $1.5
billion or $1.57 per share earned in the year-ago quarter. However,
the profits surpassed the Zacks Consensus Estimate of 85 cents per
The company's results were affected by interruption of work at its
Grasberg mine in Indonesia, partially offset by positive impact
from higher sales in North America. Including losses on early
extinguishment of debt of $149 million or 16 cents per share,
reported net income in the quarter stood at $764 million or 80
cents per share, which was almost half the prior-year quarter's net
Revenues in the quarter were $4.6 billion, a 19% drop from $5.7
billion in the prior-year quarter, but ahead of the Zacks Consensus
Estimate of $3.8 billion. Consolidated sales from mines declined to
827 million pounds of copper and 288,000 ounces of gold from 926
million pounds and 480,000 ounces, respectively, in the prior-year
For 2012, Freeport-McMoRan expects consolidated sales of 3.7
billion pounds of copper, 1.1 million ounces of gold and 81 million
pounds of molybdenum. In the second quarter, consolidated sales are
estimated at 895 million pounds of copper, 235,000 ounces of gold
and 20 million pounds of molybdenum.
Estimate Revisions Trend
In the past 30 days, five out of 15 analysts covering the stock
have lowered their estimates for the second quarter while none
moved in the opposite direction. Over the last seven days, two
analysts have snipped their estimates for the second quarter with
no upward revisions.
Estimates for fiscal 2012 portray almost a similar trend. Of the
16 analysts covering the stock, seven analysts lowered their
estimates for the year over the last 30 days while none moved them
upwards. There were three downward revisions over the last week for
the year with no upward movements.
The Zacks Consensus Estimate for the second quarter has been
reduced to 82 cents per share recently from 87 cents in the last 30
days and 84 cents in the last 7 days. The Zacks Consensus Estimate
for fiscal 2012 is $3.82, representing an estimated year-over-year
decline of 20.97%.
Freeport is the world's largest producer of molybdenum. The
company competes with
Newmont Mining Corp.
Southern Copper Corp.
). The company is conducting explorations close to its existing
mines with a goal to boost reserves, which will facilitate the
development of additional future production capacity across the
large minerals districts where it operates.
The company's favorable exploration data elicit opportunities
for meaningful future reserve additions in North and South America
as well as in the Tenke Fungurume minerals district in Congo's
However, higher production cost is a concern for Freeport. Unit
costs are expected to rise across the company's copper-producing
segments (specially the Indonesian operations) due to higher input
Further, the Grasberg minerals district, the most significant
operating asset of Freeport, is exposed to political, economic and
social uncertainties in Indonesia. Uncertainties surrounding the
Grasberg mine may continue to weigh on the company's results.
Currently, the shares of Freeport maintain a Zacks #3 Rank,
which translates into a short-term (1 to 3 months) Hold rating. We
have a long-term (more than 6 months) Neutral recommendation on
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