Tuesday, April 20, 2010

Freeport-McMoRan (NYSE:FCX) Quarterly Preview

Freeport-McMoRan (NYSE:FCX) is scheduled to release its quarterly results on Wednesday before the opening bell, and strong Chinese demand is expected to propel the earnings for the company to an estimated $1.91 a share on revenue of $4.5 billion.

Even with the projected lower production levels, that shouldn't hurt the company for the quarter, as increased gold and copper prices during that time should more than offset that.

Most of the increased production costs have come from lower quality grades up ore, and nothing seen in poor management of operations.

Domestic and mature economies aren't expected to help the company much going forward, and China, and to a lesser degree, other emerging markets, will be the main driver of revenue and profits for some years, as the economies of mature countries will take years to recover.

Freeport-McMoRan won't be hard to figure out for some time, as all you have to do is primarily watch demand from China for copper, and to a lesser degree the other emerging markets they serve in a significant way, specifically as they relate to copper demand.

This isn't to completely remove the U.S. economy out of the picture, but that will take time to generate strong demand, although watching the housing and construction market is something that should be part of the tracking of the performance of Freeport-McMoRan.

Another operational cost which needs to be followed is energy costs, which will be higher for the quarter, but again, the higher prices of copper and gold should overcome that with no problem, but it will have to also be watched in the quarterly performances of the company.

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