Presentation is loading. Please wait.

Presentation is loading. Please wait.

Freeport-McMoRan Copper & Gold Inc. An Overview of Financial Performance Buy Recommendation, November 2007 Analysis by Corrie Livesay and Stephanie Snyder.

Similar presentations


Presentation on theme: "Freeport-McMoRan Copper & Gold Inc. An Overview of Financial Performance Buy Recommendation, November 2007 Analysis by Corrie Livesay and Stephanie Snyder."— Presentation transcript:

1 Freeport-McMoRan Copper & Gold Inc. An Overview of Financial Performance Buy Recommendation, November 2007 Analysis by Corrie Livesay and Stephanie Snyder

2 Article Identified on Motley Fool Wednesday's 5 Large-Cap Leaders By Tim Beyers November 1, 2007 Each day, The Wall Street Journal publishes a list of large-cap winners. Here are Wednesday's best: COMPANY Closing CAPS Rating % Change 52-Week CAPS RatingCAPS Rating Price (out of 5) Range Price (out of 5) Range BlackRock (NYSE: BLK) $ *** 4.69% $ $ BLK GlobalSantaFe (NYSE: GSF) $81.03 ***** 4.46% $49.40-$81.27 GSF IAC/InterActive (Nasdaq: IACI) $29.46 *** 3.77% $25.08-$40.99 IACI Paccar (Nasdaq: PCAR) $55.56 **** 3.23% $38.69-$65.75 PCAR Freeport-McMoRan (NYSE: FCX) $ ***** 3.22% $48.85-$ FCX Sources: The Wall Street Journal, Yahoo! Finance, Motley Fool CAPS.

3 Company Overview ( ) Freeport-McMoRan Copper & Gold, Inc., through its subsidiaries, engages in the exploration, mining, and production of copper, gold, and silver. It holds interests primarily in the Grasberg open pit and the Deep Ore Zone mines in Indonesia. The company also owns interests in the Grasberg block cave, Kucing Liar, Deep Mill Level Zone, Ertsberg Stockwork Zone, Mill Level Zone, Big Gossan, Dom open pit, and Dom block cave. In addition, it smelts and refines copper concentrates, and markets the refined copper products. As of December 31, 2006, it had 2,813,089 metric tons of proven and probable recoverable ore reserves. Freeport-McMoRan Copper & Gold, Inc. sells its concentrates containing copper, gold and silver primarily to companies in Asia and Europe, and to international trading companies. The company was founded in 1987 and is based in Phoenix, Arizona. Source: Yahoo.Finance.com

4 Worldwide Operations FCX has a dynamic portfolio of operating, expansion and growth projects in the copper industry and is the worlds largest producer of molybdenum. Major projects include: The recently completed $900 million expansion of the Cerro Verde mine in Peru; The development of the new $580 million Safford mine in Arizona, which is expected to begin production in early 2008; A project to extend the life of El Abra through sulfide leaching is expected to begin in 2010; The exciting Tenke Fungurume copper/cobalt project in the Democratic Republic of Congo, which is expected to begin production in 2009; The expansion of the DOZ underground mine in Indonesia to 80,000 metric tons per day; and Other developments of large-scale, high-grade underground ore bodies in the Grasberg minerals district in Indonesia.

5

6 Key Statistics FCX As of 11/06/07 Price $ Week High $ Week Low $ Beta1.18 Current P/E Forward P/E Year Est. Growth Rate 37.5% Earnings/Share9.17 Market Cap B Source: Moneycentral.com

7 Financials Source: Finance.Google.com

8 News Freeport Sells Wire and Cable Business Thursday November 1, 6:17 pm ET Freeport Sells Wire and Cable Business for $735 Million PHOENIX (AP) -- Freeport-McMoRan Copper & Gold Inc. said it has sold its international wire and cable business to General Cable Corporation for $735 million. Phoenix-based Freeport-McMoRan, one of the world's largest copper miners, said Wednesday it will use net proceeds of about $620 million to help pay off debt following its acquisition of Phelps Dodge. PHOENIX (AP) -- Freeport-McMoRan Copper & Gold Inc. said it has sold its international wire and cable business to General Cable Corporation for $735 million. Phoenix-based Freeport-McMoRan, one of the world's largest copper miners, said Wednesday it will use net proceeds of about $620 million to help pay off debt following its acquisition of Phelps Dodge. The wire and cable business, known as Phelps Dodge International Corporation, operates factories and distribution centers in 19 countries throughout Latin America, Asia and Africa. The wire and cable business, known as Phelps Dodge International Corporation, operates factories and distribution centers in 19 countries throughout Latin America, Asia and Africa. Freeport-McMoRan said it expects to record charges of about $20 million, including $12 million to net income, for transaction and related costs. Freeport-McMoRan said it expects to record charges of about $20 million, including $12 million to net income, for transaction and related costs.

9 Some Positive News If above-ground copper stockpiles stay low, speculators will continue to add a risk premium to coppers price. If above-ground copper stockpiles stay low, speculators will continue to add a risk premium to coppers price. Freeport-McMoRan has only one earnings miss in the past 11 quarters. Freeport-McMoRan has only one earnings miss in the past 11 quarters. FCX is very close to opening the Safford copper mine in SE Arizona with expected copper volumes here in the fourth quarter.

10 Possible Negative News FCXs stock price is ultimately affected by the prices of gold, copper, and molybdenum. Investors often turn to gold as a hedge against inflation and pull back when the dollar gains strength and oil prices retreat. Copper is used primarily in the building industry (48%). If the economy slows this could decrease the demand for copper.

11 Gold and Copper Correlation Since the beginning of the commodities bull market in 2001 copper and gold have had a correlation of.921 which yields an r-square of 85%. SOURCE: Zeal Speculation and Investment; March 31, 2006

12 10 Year Stock Performance Source: Moneycentral.com

13 Freeport McMoRans Year-to-Date Performance Compared to Competitors Source: Moneycentral.com

14 Comparison of Price/Earning Ratios Source: Smartmoney.com

15 Comparison of Financial Strength & Volatility Source: Smartmoney.com

16 Comparison of Key Statistics Source: Smartmoney.com (Millions)

17 Comparison of Growth Estimates Source: Smartmoney.com

18 Comparison of Profitability & Efficiency Source: Smartmoney.com

19 What the Analysts Say Source: Moneycentral.com & Finance.Yahoo.com

20 Insider Trading Source: Smartmoney.com, Moneycentral.com, & Yahoo.Finance.com

21 What Others Think What the Community Thinks Total Players 1713 Outperforms 34 Underperforms All-Stars 823 Outperforms 8 Underperforms Wall Street 13 Outperforms 1 Underperforms Interview posted on Wednesday. October 31, 2007

22 2-Stage Growth Model: FCX Source: Smartmoney.com

23 Intrinsic Growth Rate Intrinsic Growth Rate= ROE (1 – payout ratio) Intrinsic Growth Rate= ROE (1 – payout ratio) = 25.98%(1 – 32.2%) = 25.98%(1 – 32.2%) = 17.61% = 17.61% Analysts recommended a 43.8% 5-year growth rate so we took the average to find a growth rate of 30.71%. Analysts recommended a 43.8% 5-year growth rate so we took the average to find a growth rate of 30.71%.

24 3-Stage Growth Model

25 3-Stage Growth Model with Intrinsic Growth Rate Only

26 Relative Valuation P/EEPS Current P/E12.5Low Estimate Forward P/E11.0Avg. Estimate Industry P/E12.3High Estimate EPS ($9.83) 2007 EPS ($10.27) 2007 EPS ($11.03) 2008 EPS ($7.59) 2008 EPS ($10.76) 2008 EPS ($13.41) P/E 11.0$108.13$112.97$121.33$83.49$118.36$ P/E 12.3$120.91$126.32$135.66$93.35$132.35$ P/E 12.5$122.88$128.38$137.87$94.88$134.50$ ScenarioEst. Return 2007 Worst-1.70% Expected14.84% High25.34% ScenarioEst. Return 2008 Worst-24.10% Expected20.32% High53.39%

27 Recommendation FCX is witnessing strong growth backed by improved productivity and a strong cash flow position. FCX is witnessing strong growth backed by improved productivity and a strong cash flow position. At the current price of $110.00, we believe FCX to be undervalued. At the current price of $110.00, we believe FCX to be undervalued. We believe that $ is very obtainable with the potential of reaching $ We believe that $ is very obtainable with the potential of reaching $ We suggest purchasing FCX around $ We suggest purchasing FCX around $

28 Questions?


Download ppt "Freeport-McMoRan Copper & Gold Inc. An Overview of Financial Performance Buy Recommendation, November 2007 Analysis by Corrie Livesay and Stephanie Snyder."

Similar presentations


Ads by Google