Freeport (FCX) Shares Up 56% in 3 Months: What’s Driving It?

Shares of Freeport-McMoRan Inc. FCX have rallied 55.5% in the past three months compared with the industry’s 35.9% rise and the S&P 500’s 14.5% gain.

The company has a market cap of around $18.5 billion. Average volume of shares traded in the past three months was nearly 23,315.2K. The company has an expected earnings per share (EPS) growth rate of 400% for 2020.

Let’s analyze the factors that are driving the stock.

Driving Factors

Upbeat views for the second quarter, bright prospects from key growth projects and rising copper prices are contributing to the company’s price performance.

Freeport recently issued an update on its second-quarter 2020 operational and financial performance.

The company stated that it expects copper sales to exceed its April 2020 estimate of 690 million pounds by around 8% in second-quarter 2020 and gold sales are expected to surpass the previous estimate of 165,000 ounces by nearly 10%.

Freeport is advancing the ramp-up of underground production at Grasberg, which will help the company establish large-scale, low-cost copper and gold production. The company is also advancing initiatives in the Americas to boost cashflows in 2021 and beyond.

In North America, the company is implementing its revised operating plans. Further, production, costs and capital management are expected to be at par or better than forecast. The Lone Star project is mostly complete and is on track to produce nearly 200 million pounds of copper per year starting second-half 2020.

In South America, Freeport achieved considerable progress at Cerro Verde during the second quarter to restore operations. Cerro Verde mill operations produced an average of 315,000 metric tons of ore per day during the second quarter.

In Indonesia, Freeport’s ramp-up of underground production at the Grasberg minerals district is continuing per schedule.  In the second quarter, the Grasberg Block Cave and Deep MLZ underground mines together produced more than 54,000 metric tons of ore per day.

Also, copper prices have witnessed a rally throughout June. Factors like optimism over financial stimulus, strong demand for the red metal in China    (top consumer) amid concerns over supply disruption from top producer Chile due to the worsening coronavirus situation in the country are driving copper prices. Notably, prices of the red metal were up roughly 25% in the second quarter.

Moreover, earnings estimate revisions have a great impact on stock prices. Notably, the Zacks Consensus Estimate for second-quarter earnings for Freeport has moved up 53.8% in the past month.

Zacks Rank & Other Key Picks

Freeport currently carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the basic materials space are Sandstorm Gold Ltd SAND, Harmony Gold Mining Company Limited HMY and AngloGold Ashanti Limited AU, all carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Sandstorm Gold has an expected earnings growth rate of 55.6% for 2020. The company’s shares have surged 77.3% in the past year.

Harmony Gold has an expected earnings growth rate of 264.3% for fiscal 2020. Its shares have returned 115.1% in the past year.

AngloGold has an expected earnings growth rate of 109.9% for 2020. The company’s shares have surged 71.3% in the past year.

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