Freeport downgraded at FBR as MLP upside potential now seems limited

|By:, SA News Editor

It's time to take profits in Freeport McMoRan (FCX +0.2%) after a strong six-month run, FBR Capital says in downgrading shares to Market Perform from Outperform.

While investors are excited at the possibility of an MLP of FCX's California oil and gas assets, the firm believes proceeds ($5.3B-$6B) may not be enough to support expanded valuation and giving up diversified exposure, which was one of the rationales for the acquisition of the assets.

FBR sees Southern Copper (SCCO +2.1%) as a better bet now; it thinks most of the production growth/dividend cut risk now has been priced in, valuation has become more attractive, and SCCO should restart work on its troubled Tia Maria project by March.