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Here's Why Shares of Freeport-McMoRan Dropped 15% in January

By Scott Levine - Updated Feb 10, 2020 at 5:03PM

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There was more than one reason investors greeted this copper stock with an icy reception during the first month of the new year.

What happened

Reversing course from their 27% rise in 2019, shares of Freeport-McMoRan (FCX 2.92%) plunged 15.4%% in January, according to data from S&P Global Market Intelligence. The precipitous 9.8% drop in the price of copper represented one factor in the stock's decline, but a bearish tone from Wall Street and a disappointing Q4 earnings report were additional sources of fuel for the fire.

So what

Whereas Freeport-McMoRan's stock received an upgrade from analysts in the last month of 2019, the first month of 2020 began on a less fortuitous note. In mid-January, Curt Woodworth, an analyst with Credit Suisse, downgraded the stock to underperform from neutral and reduced his price target to $10 from $11, according to Thefly.com.

An arrow trending up is erased and redrawn to point lower.

Image source: Getty Images.

Failing to excite investors later in the month, shares traded down as much as 8% on Jan. 23, when the company released its Q4 earnings. On the top line, it reported $14.4 billion for 2019, a 23% drop from $18.6 billion in 2018. The bottom of the income statement didn't provide much solace as the company reported a $0.17 loss per share, a notable downturn from the $1.79 earnings per share for 2018.

Investors also found the cash flow statement to be disheartening, since the company reported waning operating cash flow in 2019 versus 2018. Whereas Freeport-McMoRan generated $3.9 billion in cash from operations in 2018, the company reported $1.5 billion operational cash flow for 2019. 

Now what

While it's one of the more recognizable names among copper-oriented stocks, Freeport-McMoRan is far from the only choice for investors seeking exposure to the metal. The stock's recent decline nonetheless seems to reflect the fears of investors with short-term investing horizons and those with longer horizons (our favorite type of investors), suggesting that this may represent a possible entry point for some. For example, management forecasts copper sales rising steadily from 3.5 billion pounds in 2020 to 4.6 billion pounds in 2022; likewise, gold sales are expected to rise from 800,000 ounces in 2020 to 1.7 million ounces in 2022.

Scott Levine has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Freeport-McMoRan Inc. Stock Quote
Freeport-McMoRan Inc.
FCX
$31.39 (2.92%) $0.89

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