Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX) will be coming out with earnings on the morning of April 18, 2013. Due to recent weakness in copper prices, revenues are likely to miss and it might be a challenge to meet current earnings expectations. However, rarely have I found a stock that has been decimated so thoroughly in the days just prior to earnings being announced. The stock closed at 33.45 on April 9, 2013, just 9 days ago. And now on the eve of earnings, we hit a low of 27.52 and closed 28.00.
At Long-Term Support
On Oct. 3, 2011 we hit a low of 27.50, which was down from 54 just ten weeks before. Three months later FCX was back at 47. Now we have hit a low today of 27.52 and are down from 42 achieved 6 months ago. Although we could go lower, the rebound from current prices should at least retrace to the high 30s if not 40s. The current PE is ridiculously low at less than 9 and a return to a PE of 14 would mean a 50% rally from current levels with no change to the earnings picture. And just imagine when copper prices recover sometime down the road.
Back in June 2010, FCX traded down to 25.93, just under 26, and then started a rally that culminated in a high of 57 just 6 months later. You see, every time FCX trades below 30, it does not stay under 30 more than 2-4 weeks and then has a substantial rally. We may or may not be at the bottom now at 28, but the ultimate low on this downturn should not be more than a couple dollars away. And after hitting the bottom, this stock should recover to at least 45 if not higher within the next 3 to 6 months if history is any guide. My advice is to buy in the pre-market prior to earnings and to add on any post earnings weakness. This stock was cheap at 31 and now at 28 and below it is getting ridiculously cheap. FCX is being drug down along with all materials and mining stocks thanks a lot to the recent crash in the gold market. It is time to start picking up the pieces and taking advantage of prices that are not justified in the long-term.
Disclosure: I am long FCX.