Despite Short-Term Risks Freeport McMoran Worth a Look

Key Points

• FCX stock is down nearly 4% after the miner came to light on revenue in its fourth-quarter earnings report.  
• There are several factors contributing to the uncertain short-term sentiment weighing on FCX stock.
• However, the long-term outlook for copper prices continues to paint a bullish long-term picture for Freeport-McMoRan. 

Freeport-McMoRan Inc. NYSE: FCX stock shares are down nearly 4% (3.96%) after the company released its fourth quarter and full-year 2024 earnings report on January 23. The stock is off its session lows in midday trading, but it’s still hovering around its 52-week low. 

One reason for the stock’s slide is that the mining company posted a decline in year-over-year (YoY) revenue. The $5.72 billion the company generated was down from the $5.9 billion it generated in the same quarter in 2023. GAAP earnings also missed analysts’ expectations and were lower YoY. 

However, with a beat in non-GAAP earnings and production volumes, the sell-off may have been baked in. Heading into earnings, the Freeport-McMoran analyst forecasts on MarketBeat showed several analysts lowering their price targets or even downgrading the stock in January 2025. 

FCX stock has moved up and down along with the price of copper. In fact, the similarities between the two charts are eerie. The long-term outlook for copper demand remains strong. But does that mean this is a time to buy FCX stock? 

Uncertainty Is Driving Short-Term Sentiment

Investors have heard enough about tariffs in the last few months to last a lifetime. And now that President Trump is in the White House, the administration’s tariff plans are starting to take shape.

As part of President Trump’s initial wave of executive orders, the administration plans to impose 25% copper tariffs on Canadian and Mexican copper starting on February 1. Although Freeport-McMoRan doesn’t have mining operations in those countries, it could be impacted if Canada and Mexico imposed retaliatory tariffs on imported copper. 

Another concern is a potential slowdown in the Chinese economy. Increased copper demand due to the government’s increased stimulus measures lifted Freeport’s non-GAAP earnings in the quarter. However, there are concerns that the Chinese economy is slowing, which would be bearish for copper demand.

The company is also engaged in a dispute with the Indonesian government over its ability to export copper concentrate. Freeport’s license expired in December, and some analysts are expressing concern about the company’s ability to get an extension. A delay would result in cuts to production and sales in the current quarter.

As if that wasn’t enough, investors also need to consider the rise in the U.S. dollar. The spot price of commodities, such as gold and copper, has an inverse relationship to the dollar, so when it’s rising, the spot price of metals declines. 

There’s Still a Lot to Like About Freeport’s Fundamentals

Despite the top-line miss, Freeport-McMoRan noted that both copper and gold sales came in above the company's October 2024 guidance. Unit net cash costs were also below the October guidance. 

It’s also important to remember that, prior to the report, FCX stock was up 5.7% in the first two weeks of the new year. The enthusiasm for the company’s stock has to do with the expected demand for copper to rise. Freeport-McMoRan is one of the leading miners of copper and offers investors a stable balance sheet and plenty of production. 

Let Copper Be Your Guide With FCX Stock

Investors have a pretty tall wall of worry to climb before they want to invest in FCX stock. However, all the concerns are short-term and don’t impact the longer-term outlook for copper, which will be essential for meeting the growing demand for new energy and power applications.

Freeport-McMoRan has solid fundamentals. In the fourth quarter, the company reported full-year copper and gold production volumes that exceeded sales volumes, and it increased its production outlook for both copper and gold. 

The analyst forecasts on MarketBeat have a consensus price target of $52.42, a 32% increase from the stock’s price after the earnings dip. That price is supported by an anticipated 27.9% growth in earnings per share (EPS) in the coming 12 months. 

That said, for those that place a value on price-to-earnings numbers, you’ll be paying a premium for FCX stock that trades around 25x earnings. The sector average for basic materials stocks is around 19x earnings.