FCX Beats Consensus Handily - Analyst Blog

Metals and mining powerhouse Freeport-McMoRan Copper & Gold Inc. (FCX) posted excellent net income of $1.5 billion or $3.25 per share in the fourth quarter of 2010, outshining the Zacks Consensus Estimate of $2.87 per share.

Quarterly revenues of $5.6 million surpassed the Zacks Consensus Estimate of $5.19 billion and were up 21.5% year over year. Higher metal prices drove sales and earnings in the quarter.

Sales Prices and Volumes

Averaged realized metal prices surged and copper prices leaped 23.4% year over year to $4.18 per pound. Gold prices jumped 25.4% year over year to $1,398 per ounce, while molybdenum prices experienced a 23.4% year-over-year rise to $16.60 per pound.

However, copper sales volumes plunged 4.5% year over year in the quarter to 941 million pounds, while gold sales volumes increased 7.1% to 497,000 ounces. Molybdenum sales volumes of 17 million pounds were up by 6.3% year over year.

Financial Review                               

Net cash cost per unit in the quarter decreased 14.5% to 53 cents per pound versus 62 cents in the fourth quarter of 2009. Operating cash flows of $2.1 billion for fourth-quarter 2010 increased by a robust 42.7% from $2.8 billion as of December 31, 2009. Capital expenditures totaled $535 million for the fourth quarter of 2010.

As of December 31, 2010, total debt was approximately $4.8 billion with $3.7 billion in cash. From January 1, 2010 through December 31, 2010, Freeport repaid $1.6 billion of debt.

Guidance

In 2011, Freeport expects to sell 3.85 billion pounds of copper, 1.4 million ounces of gold and 70 million pounds of molybdenum. For the upcoming quarter, the company projects sales of 840 million pounds of copper, 325 thousand ounces of gold and 17 million pounds of molybdenum. The company expects average copper prices of $1.10 per pound, $1,350 per ounce of gold and $15 per pound of molybdenum for fiscal year 2011.

Operating cash flows are estimated to be $8.0 billion for the full year. However, a hypothetical $0.05 per pound change in copper prices, $55 million for each $50 per ounce change in the average price of gold and $80 million for each $2 per pound change in the average price of molybdenum would impact operating cash flows by $150 million in fiscal 2011.

Freeport expects capital expenditures of $2.5 billion in 2011, which primarily includes the sulfide ore project at El Abra, underground development activities at Grasberg, construction activities at the Climax molybdenum mine and investments in a new sulphur burner facility at Safford.

Freeport shares maintain a Zacks #3 Rank, implying a short term (1-3 months) Hold recommendation.