What’s Next for Freeport-McMoRan Stock After a Challenging 2024?

Freeport-McMoRan (NYSE: FCX),[1] one of the largest producers of copper, reported disappointing  results in Q4 of 2024, with revenues dropping 3.1% year-over-year to £5.72 billion, and earnings per share of £0.19 down 42% year-over-year. The stock dropped around 12% post the result announcement and has since then recovered slightly. Overall, while FCX's near-term performance may be impacted by sales disruptions and costs, its long-term outlook remains favorable, driven by strong demand for copper and potential cost-saving measures.

We believe Freeport valuation to be around £46 per share, 19% above the current price levels. [2] How Did FCX Fare In Q4? While electrification trends and AI infrastructure investments supported demand, weakness in traditional sectors like residential construction and autos had an effect, with the company reporting lower sales.

The company's Indonesian Grasberg mine produced 376 million pounds of copper, falling below estimations, due to operational challenges, including ongoing smelter issues. Additionally, copper exports from Indonesia faced regulatory delays and restrictions. FCX received late approvals in Q4 2024, which impacted shipment volumes.

While copper prices remained relatively strong, macroeconomic factors--including a strong U.S. dollar, trade uncertainties, and slower-than-expected growth in China--created headwinds. Having said that,  for the full year 2024, the company reported revenue of £25.5 billion, which was up 11% from 2023. However, net income only increased by 2.6% to £1.89 billion, and profit margins fell to 7.4% from 8.1%.

Profitability was impacted due to higher costs in certain regions, particularly in North America, where unit net cash costs reached £3.04 per pound, significantly higher than in Indonesia (£1.66 per pound). Separately, if you want upside with a smoother ride than an individual stock, consider the High Quality portfolio[3], which has outperformed the S&P, and clocked >91% returns since inception.

Image by Lukasz Klepaczewski from Pixabay

What Does This Mean For FCX Stock? The increase in FCX stock over the last 4-year period has been far from consistent, with annual returns being more volatile than the S&P 500. Returns for the stock were 61% in 2021, -7% in 2022, 14% in 2023, and -10% in 2024.

The Trefis High Quality (HQ) Portfolio[4], with a collection of 30 stocks, is much less volatile. And it has comfortably outperformed the S&P 500 over the last 4-year period.
 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[5]. Given the current uncertain macroeconomic environment around rate cuts and multiple wars, could FCX face a similar situation as it did in 2023 and 2024 and underperform the S&P over the next 12 months - or will it see a strong jump?

Despite the challenges, FCX remains optimistic about long-term copper demand growth, particularly as the global energy transition and infrastructure investments continue to drive increased copper consumption. The company expects its Indonesian smelter to restart production by mid-2025. For the full year 2025, the company expects to sell 4.0 billion pounds of copper, 1.6 million ounces of gold, and 88 million pounds of molybdenum.

Operating cash flows are projected to reach £6.2 billion. The company also anticipates an 8% increase in U.S. copper production in 2025, with further growth expected in 2026 and 2027. Gold production guidance for 2025 is 7% higher than previous estimates, driven by inventory drawdowns and slightly higher ore grades.

Despite recent challenges, including lower revenue in Q4 2024 due to declining ore grades and shipment timing issues, FCX remains focused on cost management, capital efficiency, and long-term growth.

[1] Returns as of 2/20/2025
[2] Cumulative total returns since the end of 2016

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References

1. ^ Freeport-McMoRan (NYSE: FCX), (www.trefis.com)
2. ^ Freeport valuation (www.trefis.com)
3. ^ https://www.trefis.com/data/companies/PORTFOLIOS/no-login-required/RsQ6oXgC/High-Quality-Portfolio-30-Stocks-with-210-Return-Since-2016-vs-94-for-S-P-500?from=blurbgf_UNH12052024 (www.trefis.com)
4. ^ High Quality (HQ) Portfolio (www.trefis.com)
5. ^ HQ Portfolio performance metrics (www.trefis.com)
6. ^ Reinforced Value Portfolio (www.trefis.com)
7. ^ 716% (www.trefis.com)
8. ^ Market Beating Portfolios (www.trefis.com)
9. ^ Price Estimates (www.trefis.com)