FCX Up 15% in One Month, Now Is Not The Time To Buy The Stock

We believe there is a near-equal mix of good and bad in FCX stock given its overall Moderate operating performance and financial condition. But keeping in mind its High valuation, we think that the stock is Unattractive. Here is our multi-factor assessment.

But no matter how attractive, investing in a single stock carries high risk. Trefis High Quality Portfolio and is designed to reduce stock-specific risk while giving upside exposure

Let’s get into details of each of the assessed factors but before that, for quick background: With $66 Bil in market cap, Freeport-McMoRan engages in mining mineral properties across the Americas and Indonesia and operates oil and gas assets in offshore California and the Gulf of Mexico.

[1] Valuation Looks High

This table highlights how FCX is valued vs broader market. For more details see: FCX Valuation Ratios

[2] Growth Is Moderate

• Freeport-McMoRan has seen its top line grow at an average rate of 2.5% over the last 3 years
• Its revenues have grown 4.6% from $25 Bil to $26 Bil in the last 12 months
• Also, its quarterly revenues grew 14.5% to $7.6 Bil in the most recent quarter from $6.6 Bil a year ago.

This table highlights how FCX is growing vs broader market. For more details see: FCX Revenue Comparison

[3] Profitability Appears Moderate

• FCX last 12 month operating income was $6.9 Bil representing operating margin of 26.8%
• With cash flow margin of 25.4%, it generated nearly $6.6 Bil in operating cash flow over this period
• For the same period, FCX generated nearly $1.9 Bil in net income, suggesting net margin of about 7.5%

This table highlights how FCX profitability vs broader market. For more details see: FCX Operating Income Comparison

[4] Financial Stability Looks Strong

• FCX Debt was $9.3 Bil at the end of the most recent quarter, while its current Market Cap is $66 Bil. This implies Debt-to-Equity Ratio of 14.0%
• FCX Cash (including cash equivalents) makes up $4.5 Bil of $56 Bil in total Assets. This yields a Cash-to-Assets Ratio of 7.9%

[4] Downturn Resilience Is Very Weak

FCX has fared worse than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.

2022 Inflation Shock

• FCX stock fell 51.7% from a high of $51.93 on 25 March 2022 to $25.09 on 14 July 2022 vs. a peak-to-trough decline of 25.4% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 29 April 2024
• Since then, the stock increased to a high of $54.86 on 20 May 2024 , and currently trades at $46.07

 
2020 Covid Pandemic

• FCX stock fell 60.8% from a high of $13.53 on 13 January 2020 to $5.31 on 18 March 2020 vs. a peak-to-trough decline of 33.9% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 15 July 2020

 
2008 Global Financial Crisis

• FCX stock fell 86.7% from a high of $62.93 on 20 May 2008 to $8.40 on 5 December 2008 vs. a peak-to-trough decline of 56.8% for the S&P 500.
• The stock is yet to recover to its pre-Crisis high

But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read FCX Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – S&P 500, Russell, and S&P midcap. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.