Citi analyst Alexander Hacking maintained a Hold rating on Freeport-McMoRan (FCX – Research Report) yesterday and set a price target of $46.00.
Geoff Meacham has given his Hold rating due to a combination of factors involving the company’s current performance and future outlook. Freeport-McMoRan has demonstrated solid execution by consistently meeting production guidance, a notable achievement in the copper mining industry. However, the company faces challenges, particularly at its U.S. operations, where production and cost issues have been exacerbated by labor turnover influenced by the COVID-19 pandemic. Although there is the potential for significant production increases through leaching initiatives, which could be highly cost-effective compared to new greenfield mining projects, these benefits are not sufficient to alter the current rating.
The Hold rating also stems from the valuation of Freeport-McMoRan’s stock in relation to copper prices. The stock’s current valuation would require a copper price of around $10,000 per ton to be justified, a figure that is not aligned with Citi’s base case scenario, which anticipates a copper price average of approximately $8,500 per ton in 2024. While there is a long-term bullish outlook on copper, with prices expected to climb significantly by the end of 2025, this forecast does not yet impact the near-term conservative stance. Additionally, the report details a reduction in the 2024 EBITDA estimate and an expected share price return of 9.3%, which suggests a lack of immediate upside potential that reinforces the Neutral or Hold recommendation.
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Freeport-McMoRan (FCX) Company Description:
Founded in 1987 and based in Arizona, Freeport-McMoRan, Inc. is a leading mining company, and focuses on exploring copper, gold, and molybdenum. Its portfolio of assets includes the Grasberg minerals district in Indonesia, one of the world’s largest copper and gold deposits; and significant mining operations in North America and South America, including the large-scale Morenci minerals district in Arizona and the Cerro Verde operation in Peru.
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