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Freeport-McMoRan Inc – often shorthanded as Freeport – closed down 1.83% on Thursday to $31.61 per share, dipping harder than the broader markets. The day’s end marked a staggering 27 million trades for the mining company, despite continuing a recent pattern of falling stock prices as seen against the 10-day price average of $35.22. However, stock prices are still up almost 16.5% for the year. Currently, the company is trading with a forward 12-month P/E of 12.65.
Freeport-McMoRan is a leading international mining company with headquarters in Phoenix, Arizona. It operates a number of long-lived, high-producing assets, most notably in Indonesia, Africa, North America, and South America. The company is one of the largest copper producers in the world and currently holds the top spot as the largest supplier of molybdenum. (Molybdenum is a metal often used in high-strength steel alloys and super alloys.)
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Freeport-McMoRan (FCX) Recent Performance
While falling stock prices are rarely welcome news for investors, Freeport appears to be undergoing a necessary correction on its overvalued stock prices. The company’s stock first began to climb in the latter half of 2020, with an exponential rise following its Q4/20 report in late January.
Upon news that increased 2020 copper output led to almost 17% growth between Q3 and Q4 – compared to 22% growth YOY – the company’s stock shot up like a rocket after five years of comparatively lackluster performance. Further good news came in early February, when the Board of Directors officially adopted financial policies the allocate cash flows after an abnormally strong year. The Board granted shareholders a base dividend of $0.30 per annum, a performance-based payout framework, and reaffirmed plans to upgrade Indonesian smelting capacity.
Despite waves of good news, Freeport-McMoRan has lagged the broader markets since the start of March. Shares have dropped almost 15% against the Basic Materials sector’s loss of 3.3%. Still, that didn’t stop the Board of Directors from announcing Wednesday that it had approved a cash dividend of $0.075 per share on its common stock, payable on 3 May. Between this dash of positivity, as well as expected continued copper output, Wall Street is looking forward to more good news come its upcoming earnings report.
Freeport-McMoRan By the Numbers
Though Freeport-McMoRan experienced a decent Q4, its overall fiscal year performance leaves something to be desired. The company experienced a revenue drop from $18.6 billion three years ago to $14.2 billion in the last fiscal year. Similarly, operating income dropped from $4.5 billion to $2.3 billion, while per-share earnings plummeted to $0.41 from $1.78. At the same time, its ROE crashed to 4.79%, compared to 19.9% three years ago.
What Does Q.ai’s AI Have to Say?
Freeport-McMoRan is an overvalued stock with plenty in the way of assets – and much less in the way of a faith-inducing balance sheet. While broader Wall Street is chomping at the bit for a repeat of the most recent quarter’s financial performance, Q.ai believes in taking a long-term approach to investing. As such, our AI has crunched the data – and the short-term report is not good.
Freeport-McMoRan rated an A in Technicals, a C in Low Volatility Momentum, D in Quality Value, and an F in Growth. Due to its exponential leap in stock prices, the company is overvalued against its assets and production, and after an abysmal fiscal year, we believe it’s best to wait until the stock falls back to earth before you invest. As a result, Freeport-McMoRan is rated Unattractive.
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