Freeport-McMoRan Inc (NYSE:FCX) posted strong gains after its 3Q2016 earnings came short of estimates. However, this result managed to report a positive quarter after seven consecutive quarterly losses.
The company reported copper sales in 3Q2016 at 1.2B lbs. while gold sales came at 317K oz., compared to 1B lbs. and 294K oz., correspondingly, a year ago. For FY2016, the company now expects copper sales at ~4.8B lbs., gold sales at 1.26M oz. and molybdenum sales of 73M lbs compared to earlier projection of copper sales of 5B lbs. of copper, gold sales of 1.7M oz. and molybdenum sales of 76M lbs.
Freeport-McMoRan reported that it has shed $1.38 billion in assets YTD with additional pending sales of $5.24 billion. The CEO Richard Adkerson said that the he doesn’t expect additional mining asset sales in the fourth quarter but may sell more gas and oil assets.
Investors should be delighted with the Freeport-McMoran results and the growth the firm is achieving with its balance sheet. The experts, previously listed FCX stock as one of the top common stock to invest in 2016, especially when it was trading well below $8 per share. This analyst’s recommendation was associated with certain risks. It was vital for the firm to reduce its capital expenditures to enhance its cash flow in FY2016. This debt load was listed as the biggest concern. Fast forward to 3Q2016 earnings, the firm has recorded remarkable progress.
Operating cash flows came impressive solid, amounting $980 million; with capital expenditures amounting to $494 million, the firm posted cash flow of $486 million. Freeport-McMoran now projects operating cash flow of $3.6 billion for FY2016, with capital expenditures of $2.8 billion and free cash flow of $800 million.
Still, the worrisome factor at this point is Freeport’s debt. The firm closed 3Q2016 with total debt of $18.98 billion compared to $1.1 billion in cash, which resulted in net debt of $17.88 billion. While the reported debt is down from net debt of over 20 billion recorded in last year, it is still a big sum that is adversely impacting performance of the company.