Is Freeport-McMoRan a Good Basic Materials Stocks to Buy Right Now?

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International mining company Freeport-McMoRan Inc. (FCX – Get Rating) in  Phoenix, Ariz., is one of the world’s largest publicly traded copper producers. The company has mining interests in Indonesia’s Grasberg minerals district, one of the largest copper and gold deposit mines, and several Americas regions.

FCX stock has gained 41.8% in price over the past year, outperforming the benchmark S&P 500 index’s 23.9% returns over this period. This can be attributed to surging copper prices in 2021 due to a supply deficit.

So, here is what we think could shape FCX’s performance in the near term:

Performance-based Shareholder Returns Policy

Last February, FCX’s board of directors adopted a financial policy of allocating its cash flows in line with its strategic objective of maintaining a strong balance sheet and increasing its cash returns to shareholders. In line with the policy, the company announced a $0.15 dividend payout payable for  Feb. 1, 2022. The payment includes a $0.075 base dividend and a $0.075 variable dividend.

In addition, FCX launched a $3 billion share repurchase program last November after successfully reducing its net debt to its $3 billion – $4 billion target range. FCX plans to return approximately 50% of its cash flows (net of Capex) to minority shareholders.

Impressive Financials

FCX’s trailing-12-month revenues increased 55.6% year-over-year to $21.18 billion. The company’s trailing-12-month EBITDA improved 220.7% year-over-year, while its net income rose 720.8% over the past year. FCX’s trailing-12-month EPS from continuing operations increased 9828.6% from its year-ago value. And the company’s trailing-12-month tangible book value and levered free cash flow rose 44.6% and 5970.2%, respectively, from the same period last year, respectively.

FCX’s revenues and net income have risen at  CAGRs of 2% and 7.4%, respectively, over the past three years. And its EPS has improved at a 9.3% CAGR, while its levered free cash flow has risen  at a 14% CAGR over the past three years.

Consensus Rating and Price Target Indicate Potential Downside

Of 10 Wall Street analysts that rated FCX, six rated it “Buy” while three rated it…

 

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