Seeking Alpha
Long/short equity
Profile| Send Message|
( followers)  

Freeport-McMoRan (NYSE:FCX) is the world's largest publicly traded copper producer. Net income was down for the first quarter of 2012 at $760 million, $0.80 per share, compared with net income of $1.5 billion, $1.57 per share, for first-quarter 2011.

Sales from mining operations for the year 2012 are expected to approximate 3.7 billion pounds of copper, 1.1 million ounces of gold, and 81 million pounds of molybdenum. Capital expenditures totaled $707 million first-quarter 2012, compared with $505 million for first-quarter 2011. In February 2012, Freeport-McMoRan sold $3.0 billion of senior notes with an average interest rate of 3%.

This data is not good for the financial statements and has not been a positive for shareholders. My analytics suggest there are areas of improvement already on the horizon. I expect Freeport-McMoRan to recover and do very well beginning later this year and into 2013.

Copper prices have rallied recently due to demand for the metal. China recently announced that it would begin to export much more copper to help ease the current global shortage.

Current Valuation for Freeport-McMoRan

Current Price:

$34.30

Comments: These are not overly strong Valuations and Target Price Projections. When I do further fundamental studies, the results neither improves nor declines. Projected earnings growth for FCX indicates there will be a strong increase through 2013. My technicals are currently graded as, "poor" as are my consensus opinions.

This suggests that INTC will continue to be a longer-term winner.

Security's valuations should be updated and studied as frequently as possible. This work may or may not offer positive support or perhaps a negative warning! I do not recommend buying INTC in the current market cycle.

Target Price:

Plus 6+% / minus 15+% from the current price.

Trailing P/E:

8.6

Forward P/E (fye 12/ date):

6.6

PEG Ratio:

1.49 (average)

Price to Sales:

1.65 (average)

Price to Book:

2.02 (average)

Return on Investment (R.O.I.)

19.2%

Valuation Divergence:

(minus) - 18% from current the price.

Source of raw data: Finviz.

Projected Price is calculated and produces a probable range of the current price over the coming one to three months. Fundamental Valuation and Technical Opinion is calculated and translated into a Rating. See the below Report Card. I often suggest cash and patience as an alternative.

Report Card

Company Symbol

Fundamental - weighting (40%)

Technical - weighting (35%)

Consensus Opinion - weighting (25%)

Report Card Grade: ( 0 - 100 / A - F )

FCX

Poor

Poor

Poor

68 / D

(NASDAQ:LIWA)

Poor

Very Poor

Poor

65 / D

(NYSE:SCCO)

Poor

Poor

Very Poor

59 / F

(SLT)

Poor

Very Poor

Very Poor

52 / F

My weighted Fundamental, Technical and Consensus Opinion ratings range from Excellent to Very Poor. Grades below 90 / A are not current (never are) candidates for buying. Grades above 60 / F are not current (never are) candidates for short selling. Information and data are ever changing, so be alert. Every companies "Grade" can from a neutral grade (60 to 90 / D to B) to a buy (greater than 90) or short sale (less than 60) in a very short time.

My Instablog article on "My Rotation Model" supports the above notes.

Industry Status

The non-ferrous metals and copper industry is and has been very weak during the past 16 months. This data is applicable, both fundamentally and on the charts. Freeport-McMoRan is technically in sync with its fundamentals and is in stride with its industry. Normally, that would be a positive remark. Looking at the above tables and the chart below tells us a very different story. These facts make clear that buying shares of these companies has not been and is not currently prudent. My criterion for taking a bullish position is that the company must have the prospect within its fundamental valuation and technical chart to outperform the general market, its sector, and industry group.

Click to enlarge all images.

Market Status

The general market is currently fundamentally overvalued and technically overbought, and its consensus opinion is much too bullish. It is showing signs of serious deterioration, especially in the area of breadth. This means that you must consider holding cash or perhaps take bearish positions in the coming weeks.

My analytic focus is investing wisely, e.g. taking advantage of the bull / bear cycles as they occur within the overall marketplace. Integrating modern and conservative fundamental analytics within these technical cycles means maintaining a process of the thorough and ongoing analytics of many companies, sectors and industry groups.

I suggest that you to take a long look at this 20-year chart. Having a longer-term perspective of a possible future investment can give you a more consistent bottom line.

Professor's Opinion

I expect these four companies to be under moderate pressure in the coming weeks. For a resumption of an up-trend, we just may have to wait awhile.

There is an old saying in the world of education: A good professor can identify an excellent and talented student in less than a minute. It takes me longer than a minute to identify an excellent company as a future profitable investment. With this review in place I now have several excellent metals and copper mining companies on my longer-term buy list.

Currently, these companies all look very similar and that is a negative. However, there are excellent indications that stock prices will bottom and be on the rise again. I will definitely review my list of metals and mining companies again in a few weeks.

Conclusion

I am bearish on both the economy and the general market. My recent postings in Instablog are focused on securities that should not be held in your portfolio. It is important for you to understand that holding cash during questionable time frames is a wise choice. (This is definitely a "questionable" time frame.) This coming Saturday, I plan to include Freeport-McMoRan in my weekly Instablog posting.

Source: Report Card: Freeport-McMoRan And Selected Peers