FCX: Freeport McMoran punished for otherwise positive results


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Freeport McMoRan is down 4% this morning as investors flee what are being perceived as quarterly numbers that are great, yet not good enough to justify immediate near-term upside. 

FCX announced this morning that it generated an otherwise solid $3.26 a share in earnings last quarter, blowing through consensus forecasts for only a $2.98-a-share profit and up 60% year-over-year.

Unfortunately for the stock, traders were expecting even better numbers from the company, which is one of the leading copper producers in the world.

In particular, FCX warned that output in both copper and gold would likely decline in the first quarter. FCX forecasts a decline of 10% in copper production on a sequential quarter-to-quarter basis and a somewhat shocking 44% decline in gold production.

Cash costs are also key. Rising production plus rising prices can sustain some degree of cost inflation — the business is growing, so everything is fine. But even if copper and gold prices are rising, shrinking production and rising costs are a recipe for margin constriction.

We know copper and gold have each had a hard time pushing past recent records, so there is also the prospect that prices will not rise much further.

Bottom line: in this environment, producer stocks have so much fragile bullish sentiment behind them that they will suffer if they do not constantly guide expectations upward.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: News Headlines , Stocks
Referenced Stocks: FCX

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