Freeport-McMoRan Scores A Solid Q3, Analysts Say: 'Benefit From High Copper And Gold Prices'

Freeport-McMoRan (NYSE:FCX) closed Wednesday’s trading session 1.26% lower at $47.92 as the market further digested its third-quarter earnings results.

The leading copper miner reported slightly lower earnings per share, coming at $0.36 instead of the expected $0.37, while soundly beating the consensus revenue estimates of $6.44b, with an actual $6.79.

The response from institutions has been mixed.

• Raymond James raised the price target to $57 from $55, maintaining an Outperform rating.
• RBC Capital Markets maintained a Sector Perform rating with a price target of $58.
• Scotiabank (NYSE:BNS) maintained a Sector Perform rating with a price target of $52.

Raymond James analyst Brian MacArthur issued an optimistic view on the miner, quoting sales of 1 billion lbs of copper and 550 Koz of gold in Q3. He noted management’s expectations to reach 4.1 billion lbs and 1.8 Moz of gold for 2024 and a cash cost of $1.58 per lb of copper.

Meanwhile, the RBC Capital Market highlighted strong free cash flow (FCF), driven by higher copper and gold prices. The firm estimates Freeport can generate $4.8 billion in FCF for 2025, yielding a 7% return at current spot prices.

“Freeport continues to benefit from high copper and gold prices,” RBC noted, emphasizing the company's significant leverage to these metals, particularly with copper comprising 75% of its revenue.

While acknowledging strong financials, RBC noted some near-term risks related to Freeport’s Indonesian smelter, which suffered a fire in October. This could delay production ramp-up into 2025. Furthermore, the smelter issue could require an extension of Freeport’s concentrate export permit, which expires at the end of the year.

While RBC projects a price target of $58, the potential upside scenario goes as high as $80.

Scotiabank’s reaction to Freeport-McMoRan's (FCX) Q3 2024 earnings was neutral, though it recognized the company’s stronger-than-expected performance. Scotiabank's estimate was lower than the market consensus, at $0.30.

Despite the positive earnings, Scotiabank maintained its “Sector Perform” rating on FCX, highlighting a “relatively balanced risk-reward” profile, but slightly reduced its 12-month price target from $52 to $52.

Analyst Orest Wowkodaw noted that the multi-year production guidance remained unchanged, with copper cash cost guidance in line with prior expectations. Scotiabank pointed out that the multi-year production guidance remained unchanged, with copper cash cost guidance in line with prior expectations.

It is worth noting that Wowkodaw downgraded Freeport-McMoRan to Sector Perform from Outperform on September 30, citing recent share price appreciation and the negligible implied return to its target for the downgrade after its shares rose 28% through September.

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