Freeport (FCX) Q4 Earnings Miss Estimates, Revenues Beat

Freeport-McMoRan Inc.FCX reported net income (attributable to common stock) of 21 cents per share for fourth-quarter 2016, as against the year-ago loss of $3.47 per share.

Net income for the reported quarter includes net charges of $59 million, or 4 cents per share, mainly reflecting estimated losses on assets held for sale and restructuring charges related to the oil and gas segment, partly offset by a gain on redeemable non-controlling interest. Barring that impact, adjusted earnings was 25 cents a share in the fourth quarter, missing the Zacks Consensus Estimate of 32 cents.

Revenues grew around 24.5% year over year to $4,377 million in the reported quarter and exceeded the Zacks Consensus Estimate of $4,062 million.

Consolidated copper sales from mines (including volumes from Tenke Fungurume through Nov 16) increased to 1.2 billion pounds of copper in the fourth quarter from 1.1 billion pounds in the year-ago quarter due to higher volumes from Cerro Verde and PT-FI, partly offset by lower sales in North America. Gold sales went up to 405,000 ounces in the reported quarter from 338,000 ounces a year ago. Sales of molybdenum increased to 22 million pounds in the reported quarter from 20 million pounds a year ago.

Freeport-McMoran, Inc. Price, Consensus and EPS Surprise

Freeport-McMoran, Inc. Price, Consensus and EPS Surprise | Freeport-McMoran, Inc. Quote

Full-Year 2016

Freeportreported a loss of $3.16 per share for full-year 2016, narrower than the loss of $11.31 per share reported year ago. Sales increased 1.5% year over year to $14,830 million in 2016.

Operational Update

Consolidated average unit net cash costs (net of by-product credits including Tenke) declined to $1.20 per pound of copper from $1.45 per pound in the year-ago quarter. This is mainly attributable to higher copper sales volumes from Cerro Verde and PT-FI and higher by-product credits.

Average realized price per ounce for gold rose to $1,174 in the quarter from $1,067 a year ago, while average realized price per pound for copper increased to $2.47 from $2.18 in the prior-year quarter.

In the fourth quarter, Freeport concluded the sales of the Deepwater GOM and onshore California oil and gas properties, for $2.6 billion and contingent consideration. In Jan 2017, the company agreed to sell its properties in the Madden area for $20 million cash. The deal is projected to complete in first-quarter 2017.

Post this transaction, Freeport's portfolio will include oil and natural gas production onshore in South Louisiana and on the GOM Shelf and oil production offshore California. Sales volume from these assets was 1.5 million barrels of oil equivalent (MMBOE) in the fourth quarter.

Realized revenues for oil and gas operations were $39.88 million compared with $37.49 million in the year-ago quarter. Cash production costs totaled $14.62 million in the quarter. Sales volume was 10.5 million barrels of oil equivalent (MMBOE) in the quarter.

Financial Position

Freeporthad cash and cash equivalents of $4,425 million as of Dec 31, 2016, up from the year ago $177 million. Freeport total debt was $16,027 million as of Dec 31, 2016, down from the year ago $20,324 million.

The company's operating cash flows were $1,135 million in the fourth quarter and capital expenditures totaled $504 million.

In Nov 2016, Freeport concluded its registered at-the-market (ATM) offering of common stock announced in Jul 2016. The company raised $1.5 billion in gross proceeds through the sale of 116.5 million shares of common stock.


For 2017, Freeport anticipates consolidated sales to be around 4.1 billion pounds of copper, 2.2 million ounces of gold and 92 million pounds of molybdenum. The expected sales are subject to the resumption of concentrate exports by PT-FI in Feb 2017 as well as PT Smelting's export license being renewed. PT-FI's share of production is expected to lower by roughly 70 million pounds of copper and 100,000 ounces of gold for each month of delay in obtaining approval to export.

Consolidated unit net cash costs (net of by-product credits) for copper mines are expected to average $1.06 per pound of copper in 2017.

For 2017, capital expenditures are expected to be roughly $1.8 billion, including $1.1 billion for key mining projects.

As previously announced, Freeport plans to strengthen its balance sheet and speed up its debt-reduction initiatives. Freeport expects to generate substantial cash flows in 2017 for debt reduction.

Freeporthas outperformed the Zacks categorized Mining-Non Ferrous industry in the last three months. The company's shares gained 60.9% while the gains recorded by the industry was 21.3%.

Zacks Rank

Freeportcurrently carries a Zacks Rank #3 (Hold).

Some better-ranked companies in the mining space include IAMGOLD Corporation IAG , Vale S.A. VALE and Cliffs Natural Resources Inc. CLF .

IAMGOLD has an expected long-term growth rate of 3% and sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

Vale posted a positive earnings surprise of 35.71% in the last reported quarter and carries a Zacks Rank #2 (Buy).

Cliffs has an average positive surprise of 55.40% over the trailing four quarters and also carries a Zacks Rank #2.

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

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

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