Will Higher Copper Prices Drive Freeport’s (FCX) Q2 Earnings?

Freeport-McMoRan Inc.


FCX

is scheduled to come up with second-quarter 2021 results ahead of the bell on Jul 22. Higher copper prices aided by strong demand and supply constraints are likely to have driven the mining giant’s sales and margins in the second quarter.

Higher Prices to Boost Margins

Freeport’s profitability is expected to have boosted by higher average realized price for copper in the June quarter. The Zacks Consensus Estimate for average realized price for copper for the second quarter stands at $4.21 per pound, reflecting a 65.1% rise year over year.

Copper had a good run so far this year on surging demand driven by a pick-up in manufacturing activities. The red metal has been gaining on a steady growth in manufacturing from China as the country continues its recovery to pre-pandemic levels, thanks to government’s strict virus containment actions, strong domestic demand and government stimulus measures. China’s manufacturing sector remains in the expansion territory despite headwinds from higher raw material costs and chip shortages.

Copper prices have been trending above $4.00 per pound since February 2021 riding on optimism regarding a robust U.S. economic growth, strong demand from China and fears over a supply crunch. Supplies from two major producers, Chile and Peru, have been volatile due to the impact of the pandemic. Inventories are also low due to the pandemic induced slowdown in production.

Prices of the metal reached an all-time high of $4.90 per pound in May. While copper pulled back in late June on China’s announcement of its plans to sell reserves to rein in commodity price surge, prices managed to hold above the $4.00 per pound level. As such, higher prices are likely to have boosted Freeport’s top and bottom lines in the second quarter.

Overall Expectations

The Zacks Consensus Estimate for second-quarter consolidated revenues for Freeport is currently pegged at $5,827 million, reflecting a year-over-year increase of 90.8%. The consensus estimate for earnings is 73 cents, which indicates a substantial rise from the prior-year reported number.

Zacks Model

Our proven model predicts an earnings beat for Freeport this time around. The combination of a positive

Earnings ESP

and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earning beat.

Earnings ESP:

Earnings ESP for Freeport is +0.82%. You can uncover the best stocks to buy or sell before they’re reported with our

Earnings ESP Filter

.

Zacks Rank:

Freeport currently carries a Zacks Rank #2.

Stocks That Warrant a Look

Here are some companies in the basic materials space you may want to consider as our model shows they too have the right combination of elements to post an earnings beat this quarter:

LyondellBasell Industries N.V.


LYB

, scheduled to release earnings on Jul 30, has an Earnings ESP of +15.13% and sports a Zacks Rank #1. You can see


the complete list of today’s Zacks #1 Rank stocks here


.

Dow Inc.


DOW

, scheduled to release earnings on Jul 22, has an Earnings ESP of +5.57% and sports a Zacks Rank #1.

Celanese Corporation


CE

, scheduled to release earnings on Jul 22, has an Earnings ESP of +8.38% and carries a Zacks Rank #2.

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