What To Expect From Freeport’s Q2 Results

Freeport-McMoRan (NYSE: FCX), one of the largest producers of copper, is expected to publish its Q2 2023 results around July 20th. We expect revenues to come in at about $5.83 billion, marking an increase of about 7% year-over-year, and about in line with consensus estimates. We project that earnings will stand at about $0.42 per share, marginally ahead of the consensus. So what are some of the trends that are likely to drive the company’s results? See our analysis of Freeport-McMoRan Earnings preview for more details.

Copper prices have been subdued this year, amid concerns about a U.S. recession,  turmoil in the banking sector, as well as weaker-than-expected demand growth post the reopening of the Chinese economy following the easing of Covid-19 restrictions. Copper prices have declined from about $4.10 per pound in early April to levels of around $3.60 as of late June, although they have recovered a bit over the last two weeks. Manufacturing activity in the U.S. has also been sluggish, with the purchasing managers index for the month of June falling to 46.3 from 48.4 in May, deteriorating for seven of the past eight months. While these trends could impact price realizations, Freeport is likely to see copper shipments improve by about 28% sequentially, with gold and molybdenum volumes also poised to pick up. This could drive revenues higher. Separately, crude oil prices have cooled off a bit in recent months, and this could have a net positive impact on energy and input costs for copper players.

Freeport stock has underperformed this year, rising by just about 7%, compared to the S&P 500 which remains up by around 16% over the same period. While Freeport stock could rise marginally if it beats earnings, there are a couple of other trends that could benefit the stock in the long run. The long-term demand outlook for copper is favorable, given the adoption of renewable energy and electric vehicles, which both are very copper intensive. For perspective, EVs use about 2x to 3x the copper used by traditional internal combustion engine vehicles, while renewable generation such as solar and wind requires over 5x more copper for each installed MW compared to conventional nuclear and fossil fuel-based power generation. While we will be revisiting our price estimate for Freeport post-Q2 results, we currently have a $39 price estimate for the stock, which is roughly in line with the current market price. See our analysis on Freeport-McMoRan Valuation: Is FCX Stock Expensive Or Cheap? for more details on what’s driving our price estimate.

[1] Month-to-date and year-to-date as of 7/13/2023
[2] Cumulative total returns since the end of 2016

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