Freeport-McMoRan, Inc. – Value Analysis (NYSE:FCX) : November 14, 2017

Capitalcube gives Freeport-McMoRan, Inc. a score of 25.

Our analysis is based on comparing Freeport-McMoRan, Inc. with the following peers – Southern Copper Corporation, Rio Tinto plc Sponsored ADR, BHP Billiton Limited Sponsored ADR, Teck Resources Limited Class B, Grupo Mexico S.A.B. de C.V. Class B, Newmont Mining Corporation, Vale S.A. Sponsored ADR, Anadarko Petroleum Corporation, Sociedad Minera Cerro Verde SAA and BHP Billiton Plc Sponsored ADR (SCCO-US, RIO-US, BHP-US, TECK-US, GMBXF-US, NEM-US, VALE-US, APC-US, CVERDEC1-PE and BBL-US).

Investment Outlook

Freeport-McMoRan, Inc. has a fundamental score of 25 and has a relative valuation of NEUTRAL.

Fundamental Score

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Company Overview

  • Considering peers, relative underperformance over the last year and the last month suggest a lagging position.
  • It currently trades at a Price/Book ratio of (2.04).
  • The market expects FCX-US to grow faster than its peers and for the company to improve its current ROE.
  • FCX-US has relatively low profit margins and median asset efficiency.
  • Compared with its chosen peers, the company’s annual revenues and earnings change at a slower rate, implying a lack of strategic focus and/or lack of execution success.
  • FCX-US‘s return on assets currently and over the past five years has trailed the peer median and suggests the company might be operationally challenged relative to its peers.
  • The company’s relatively low gross and pre-tax margins suggest a non-differentiated product portfolio and not much control on operating costs relative to peers.
  • While FCX-US‘s revenues growth has been around the peer median in recent years, the market seems to see faster growth ahead and gives its shares a higher than peer median P/E ratio.
  • The company’s relatively low level of capital investment and below peer median returns on capital suggest that the company is in maintenance mode.
  • FCX-US seems to be constrained by the current level of debt.

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Leverage & Liquidity

FCX-US is debt-constrained.

  • With debt at a relatively high 47.07% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 25.15%), and interest coverage level of 3.49x, FCX-US seems debt-constrained.
  • All 10 peers for the company have an outstanding debt balance.

FCX-US has moved to a Some Capacity from a Limited Flexibility profile at the recent year-end.

  • FCX-US‘s interest coverage is upward trending but is still within one standard deviation below its five-year average interest coverage of 7.28x.
  • The increase in its interest coverage to 3.49x from 0.87x (in 2016) was also accompanied by an increase in its peer median during this period to 6.03x from 4.36x.
  • Interest coverage rose 0.95 points relative to peers.
  • FCX-US‘s debt-EV is greater than (but within one standard deviation of) its five-year average debt-EV of 38.06%.
  • Though its debt-EV has remained relatively stable at 47.07% compared to 2016, its peer median has decreased to 25.15% from 26.66% during this period.
  • Relative to peers, debt-EV rose 1.51 percentage points.

Access the detailed analysis for Freeport-McMoRan, Inc.

Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
Southern Copper Corporation 19.79 3.01 6.03 31.3
Rio Tinto plc Sponsored ADR 21.85 1.58 8.67 71.26
BHP Billiton Limited Sponsored ADR N/A 1.85 10.27 51.3
Teck Resources Limited Class B N/A 2.17 8.79 79.07
Grupo Mexico S.A.B. de C.V. Class B 29.36 2.31 7.22 34.03
Newmont Mining Corporation 18.32 4.18 4.23 58.04
Vale S.A. Sponsored ADR 36.56 1.86 3.69 46.59
Anadarko Petroleum Corporation 28.45 2.03 1.24 25.43
Sociedad Minera Cerro Verde SAA 15.87 3.01 5.51 80.87
BHP Billiton Plc Sponsored ADR N/A 1.85 10.27 51.3
Freeport-McMoRan, Inc. 47.07 2.02 3.49 27.63
Peer Median 25.15 2.03 6.03 51.3
Best In Class 15.87 4.18 10.27 80.87

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Company Profile

Freeport-McMoRan, Inc. engages in the mining of copper, gold, and molybdenum. It operates through the following segments: Morenci; Cerro Verde; Grasberg; Molybdenum Mines; Rod & Refining; Atlantic Copper Smelting & Refining; Other Mining & Eliminations; U.S. Oil & Gas Operations; and Corporate, Other & Eliminations. The Morenci segment is located in Greenlee County, Arizona, which deals with the porphyry copper deposit that has oxide, secondary sulfide, and primary sulfide mineralization. The Cerro Verde segment is located in the southwest of Arequipa, Peru, which consists of porphyry copper deposit that has oxide, secondary sulfide, and primary sulfide mineralization. The Grasberg segment is located in the Sudirman Mountain Range in the province of Papua, Indonesia, which comprises of copper and gold deposits. The Molybdenum Mine segment operates the Henderson underground mine and the Climax open-pit mine, both in Colorado. The Rod & Refining segment consists of copper conversion facilities located in North America, and includes a refinery, three rod mills, and a specialty copper products facility. The Atlantic Copper Smelting & Refining smelts and refines copper concentrate and markets refined copper and precious metals in slimes. The Other Mining & Eliminations comprises of Miami smelter, Freeport Cobalt, molybdenum conversion facilities in the U.S. and Europe, four non-operating copper mines in North America and other mining support entities. The U.S. Oil & Gas Operations segment consists of oil and natural gas production onshore in South Louisiana and on the GOM shelf, oil production offshore California, and natural gas production from the Madden area in central Wyoming. The Corporate, Other & Eliminations segment composes of international oil and gas capital expenditures primarily related to the Morocco oil and gas properties. The company was founded by James R. Moffett on November 10, 1987 and is headquartered in Phoenix, AZ.

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