Is It Time To Buy Freeport-McMoRan? 2 Insiders Just Paid Over $42.8 Million

| About: Freeport-McMoRan Inc. (FCX)

Freeport-McMoRan Copper & Gold (NYSE:FCX) has had some serious problems lately. A "horrific" tunnel accident in Indonesia shut down production and negatively affected revenue. And Q2 2013 earnings per share fell to 49 cents from 74 cents a year ago. The commodity market can be a risky business. But that news has suddenly shifted to the back burner due to numerous stories of recent insider buying at the company. Two members of the "Office of the Chairman" just bought 1.5 million shares worth over $42.8 million. According to the company website:

James R. Moffett serves as Chairman of the Board, Richard C. Adkerson serves as Vice Chairman, President and Chief Executive Officer of FCX and James C. Flores serves as Vice Chairman of FCX and Chief Executive Officer of Freeport-McMoRan Oil & Gas. Messrs. Moffett, Adkerson and Flores comprise FCX's Office of the Chairman.

FCX Chairman James Moffett bought one million shares with a price tag of over $28.5 million. And Vice Chairman James Flores purchased 500 thousand shares at a value of $14.32 million:

Freeport-McMoRan Insider Trading

Chart Options

  • Purchases
  • Sales
  • Options Exercised
  • Options Awarded
  • Stock Gift

Transaction Details For Insider

Insider Trans
Shares Price Total
07/30 MOFFETT JAMES R Purchases $5.47 M 192,800 28.3746 4,066,880
07/29 MOFFETT JAMES R Purchases $23.06 M 807,200 28.5666 3,874,080
07/26 FLORES JAMES C Purchases $14.32 M 500,000 28.6445 886,041
07/26 WHARTON J TAYLOR Options Exercised $269.75 K 20,000 13.4875 86,856
07/26 WHARTON J TAYLOR Options Exercised $176.85 K 13,112 13.4875 99,968
07/26 WHARTON J TAYLOR Sale $269.41 K 9,416 28.6117 90,552
07/26 WHARTON J TAYLOR Options Exercised $0.00 20,000 -- --
07/26 WHARTON J TAYLOR Options Exercised $0.00 13,112 -- --
07/25 FORD GERALD J Options Exercised $269.75 K 20,000 13.4875 141,224
07/25 FORD GERALD J Options Exercised $176.85 K 13,112 13.4875 154,336

When insiders at this level buy company stock it is always important to take note. Especially when they purchase such a large amount of shares. Most investors would agree that these two men probably think the company is undervalued by the market. According to Matt DiLallo FCX is planning to take advantage of the jump in oil prices and sell some of those valuable assets:

Freeport currently has about $20.5 billion in total debt, which it's planning to reduce to $12 billion over the next three years. To get there, the company decided that it needed to be a bit more aggressive, in light of the fact that two of the top commodities it produces, copper and gold, fell in price and reduced its earnings. The company's plan now is to cut about $1.9 billion in capital cost reductions and project deferrals, as well as look to sell some of its assets.

So should investors buy FCX based on this insider activity? Some analysts think that gold and other metals may rebound due to a slower than expected economic recovery. And many people are getting scared that the stock market has peaked and is due for a correction which will send metals higher. Although earnings are expected to be less for the rest of 2013, revenue at FCX may jump dramatically:

Earnings Est Current Qtr.
Sep 13
Next Qtr.
Dec 13
Current Year
Dec 13
Next Year
Dec 14
Avg. Estimate 0.62 0.79 2.45 3.13
No. of Analysts 18.00 16.00 17.00 20.00
Low Estimate 0.41 0.58 2.00 2.21
High Estimate 0.89 1.19 3.20 4.30
Year Ago EPS 0.68 0.78 3.22 2.45
Revenue Est Current Qtr.
Sep 13
Next Qtr.
Dec 13
Current Year
Dec 13
Next Year
Dec 14
Avg. Estimate 5.71B 6.35B 20.93B 24.33B
No. of Analysts 11 10 16 16
Low Estimate 5.26B 5.40B 19.54B 22.12B
High Estimate 6.71B 8.38B 23.96B 26.72B
Year Ago Sales 4.42B 4.51B 18.01B 20.93B
Sales Growth (year/est) 29.20% 40.70% 16.20% 16.20%

A lot depends on the company being able to rein in expenses, and capitalize on planned asset sales. Right now 14 out of 20 analysts polled recommend the stock as a buy or strong buy. And the price target ranges from a low of $23 to a high of $45. That offers a large upside from the close of $29.21 on Friday:

FCX Price Target Summary

Mean Target: 35.88
Median Target: 36.00
High Target: 45.00
Low Target: 23.00
No. of Brokers: 17

There are risks involved when dealing with any stock, especially one that is involved in commodities. However we can not ignore the fact that two insiders just bought almost $43 million dollars worth of FCX. And its current P/E ratio is a very attractive 10.42, with a forward ratio of around 9. The company also pays a dividend with more than a 4% yield. If you want to get in on this stock, do it before the Bulls find out about it.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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