But when the smoke clears, keep in the back of your mind stocks that deliver standout earnings but the stock price doesn't react - those are the stocks that will generally jump at some point in the future. Also, as I mentioned this weekend, if we do enter the inevitable slower world growth phase, I think the mining stocks will probably be hurt more than other sectors such as agriculture or infrastructure - but that's just my opinion. With that said FCX hit another home run. Keep in mind this quarter represents a merger with Phelps Dodge so you can't just compare year over year - one must separate organic growth from acquisition related growth.
- Freeport-McMoRan Copper & Gold Inc., one of the world's biggest copper miners, said Wednesday its profit more than doubled in the third quarter as revenue soared.
- The mining company earned $775 million, or $1.87 per share, after preferred dividends were paid in the July-September period, up from $351 million, or $1.67 per share, a year ago. (note profits in dollars doubled, but due to charges $2.52 was reduced down to $1.87)
- Quarterly revenue more than tripled to $5.07 billion, from $1.64 billion in the third quarter of 2006.
- Earnings from continuing operations totaled $763 million, or $1.85 per share. Freeport-McMoRan said the results also included about 67 cents per share in charges related to one-time items. If those charges are excluded, that would amount to earnings of $2.52 a share.
- Analysts surveyed by Thomson Financial, who typically exclude one-time items and discontinued operations, forecast third-quarter earnings of $2.26 on revenue of $5.12 billion.
- The company attributed its third-quarter performance to continued positive market conditions for copper, gold and molybdenum, as well as strong operating results at its North American, South American and Indonesian operations.
- "We are optimistic about the outlook to deliver strong volumes of metals which will enable us to generate significant cash flows, invest in attractive development projects, achieve our debt reduction objectives and provide returns to shareholders," Chairman James R. Moffett and CEO Richard C. Adkerson said in a joint statement.
- Freeport's stock has almost doubled since it acquired copper miner Phelps Dodge in March for $25.9 billion. As of Sept. 30, the company said it still owed $7.6 billion from the acquisition and another $1.1 billion in other debt.
Takeaway: With revenue a "tad" bit below analysts expectations the company was still able to best earnings by $0.26. Impressive, and shows us either margins were much better than analysts expected and/or they are seeing some efficiencies of scale from their new larger size post acquisition.
Either way, this bodes well for the other miners as well (again I have been underweight this sector as a whole) - other names would include the "big 3": BHP Billiton (BHP), CVRD (RIO), and Rio Tinto (RTP). All with massive runs this year but pulling back now - again, I am not quite so bullish at these levels on this group as other sectors due to the potential for whispers of global slowdown hurting the psychology in this group.
Long Freeport-McMoran Copper & Gold in fund; no personal position
