With more than half of 2012 in the record books, it's important to take a look at whether the stocks that interest you can live up to their full potential. By making sure you know about a company's future plans and possible challenges, you can make a better decision about whether it's a smart investment for your portfolio.
Today, let's take a look at Freeport-McMoRan Copper & Gold (NYSE: FCX ) . As we saw in our look at Freeport-McMoRan last month, slowing growth in once-hot economies around the world have taken their toll on the miner's sales. Yet some signs of stabilization may point to a recovery for the copper and gold markets in the future. Let's take a quick look at Freeport-McMoRan's prospects for the rest of the year and beyond.
Stats on Freeport-McMoRan Copper & Gold
|Average Stock Price Target||$50.47|
|2012 EPS Estimate||$3.73|
|2013 EPS Estimate||$4.93|
|2012 Sales Growth Estimate||(7.7%)|
|2013 Sales Growth Estimate||15.2%|
|CAPS Rating (out of 5)||****|
Source: Yahoo! Finance.
What will the rest of 2012 bring for Freeport-McMoRan Copper & Gold?
For the most part, Freeport's fortunes have largely been tied to demand from China and other fast-growing economies for copper, which is vital for infrastructure. That demand hasn't been good lately, which led to a big drop in copper and gold sales last quarter.
But before you conclude that Freeport will just follow commodities prices, take a closer look at its operations. Its mammoth Grasberg mine in Indonesia has been subject to labor discord, and with a new Indonesia law requiring 20% divestiture of operations there, political concerns also abound, especially with other countries like Argentina having reawakened nationalization fears. That may be one reason why Freeport is considering a spin-off IPO of Grasberg. Similar concerns exist about potential instability in its Congolese Tenke Fungurume mining concessions.
Moreover, high prices have brought new supply on line. Thompson Creek's (NYSE: TC ) Mount Milligan mine should begin producing copper and gold in the second half of 2013, and other producers are working hard on potential projects.
But Freeport has the inside track because of its favorable cash position. With Southern Copper (NYSE: SCCO ) , Rio Tinto (NYSE: RTP ) , and BHP Billiton (NYSE: BHP ) all carrying substantial net debt, Freeport has more latitude to make strategic moves that would tax the capital structures of its competitors. That could give the company more freedom to capture profits for the rest of the year and beyond.
Freeport will still have to overcome an economic slowdown in emerging markets. But long-term investors should see any further declines as buying opportunities for the stock, as the fundamental underpinnings for global expansion remain in place.
Freeport-McMoRan Copper & Gold is definitely worth a closer look, but it's not the only promising mining play out there. Read The Motley Fool's latest special report on gold to discover the tiny gold stock digging up massive profits. It's free, but only available for a limited time.
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