Freeport-McMoRan Inc. FCX shares have lost 25.1% in the past three months. The downside is partly due to the slump in copper prices amid uncertainties over U.S. tariffs and concerns over FCX’s high production costs. 

Freeport has underperformed the Zacks Mining - Non Ferrous industry’s decline of 24.2% while outperforming the S&P 500’s fall of 13.6% in the past three months. Its peers, Southern Copper Corporation SCCO, BHP Group Limited BHP and Rio Tinto Group RIO, have lost 20.1%, 17.1% and 11.1%, respectively, over the same period. Southern Copper remains hamstrung by higher operating costs. BHP Group is facing headwinds from lower iron ore and steelmaking coal prices and higher labor costs. Weaker iron ore prices and lower shipments are weighing on Rio Tinto.

Freeport’s 3-Month Price Performance

Image Source: Zacks Investment Research

Technical indicators show that FCX has been trading below the 200-day simple moving average (SMA) since Nov. 11, 2024. The stock is currently trading below its 50-day SMA. Following a death crossover on Dec. 3, 2024, the 50-day SMA continues to read lower than the 200-day SMA, indicating a bearish trend.

FCX Stock Trades Below 50-Day SMA

Image Source: Zacks Investment Research

Given the significant pullback in Freeport’s shares, investors might be tempted to snap up the stock. But is this the right time to buy FCX? Let’s find out.

FCX’s Growth Actions to Expand Capacity & Drive Production

Freeport is well-placed with high-quality copper assets and remains focused on strong execution and advancing its organic growth opportunities. At its Cerro Verde operation in Peru, a large-scale concentrator expansion provided incremental annual production of around 600 million pounds of copper and 15 million pounds of molybdenum. It is evaluating a large-scale expansion at El Abra in Chile to define a large sulfide resource that could potentially support a major mill project similar to the large-scale concentrator at Cerro Verde. FCX is also conducting pre-feasibility studies (expected to be completed by mid-2026) in the Safford/Lone Star operations in Arizona to define a significant sulfide expansion opportunity. It also has expansion opportunities at Bagdad in Arizona to more than double the concentrator capacity of the operation. 

Also, PT Freeport Indonesia (PT-FI) substantially completed the construction of the new greenfield smelter in Eastern Java during 2024, with an expected start-up in mid-2025, followed by a full ramp-up by the end of 2025. PT-FI is also developing the Kucing Liar ore body within the Grasberg district with a targeted commencement of production by 2030. Gold production also commenced at the new precious metals refinery in late 2024. Plans are in place to transition PT-FI’s existing energy source from coal to natural gas, which is expected to significantly reduce greenhouse gas emissions at Grasberg.

FCX’s Solid Financial Health & Capital Discipline Bode Well

FCX has a strong liquidity position and generates substantial cash flows, which allow it to finance its growth projects, pay down debt and drive shareholder value. It generated operating cash flows of around $1.4 billion in the fourth quarter. The same for full-year 2024 climbed around 35% year over year to $7.2 billion. It has distributed $4.7 billion to shareholders through dividends and share purchases since June 30, 2021. Freeport ended 2024 with strong liquidity with $3.9 billion in cash and cash equivalents, $3 billion in availability under the FCX credit facility and $1.5 billion in availability under the PT FI credit facility.

At the end of 2024, Freeport had a net debt of $1.06 billion, excluding smelter projects in Indonesia. Its net debt is below its targeted range of $3-$4 billion. Freeport has a policy of distributing 50% of the available cash to shareholders and the balance to either reduce debt or invest in growth projects.  FCX has no significant debt maturities until 2027.

FCX offers a dividend yield of roughly 1% at the current stock price. Its payout ratio is 20% (a ratio below 60% is a good indicator that the dividend will be sustainable), with a five-year annualized dividend growth rate of about 21.8%. Backed by strong financial health, the company's dividend is perceived to be safe and reliable.

Higher Production Costs Cloud Freeport’s Prospects 

Freeport faces headwinds from higher costs. Freeport’s consolidated unit net cash costs per pound of copper for fourth-quarter 2024 were 9% higher than the prior-year quarter level. The company now estimates that consolidated unit net cash costs for the first quarter will be roughly 5% higher than the January 2025 guidance of $2.05 per pound of copper, mainly due to the timing of gold shipments, which has led to lower by-product credits. FCX is grappling with higher unit net cash costs in North America. Higher labor and mining costs are leading to increased unit costs in the region. 

Retreating Copper Prices Pose Concerns for FCX 

Weak demand in top consumer China due to the property crisis weighed on copper prices in 2024. The economic uncertainty in China and the absence of detailed policy plans raise concerns about future demand. The looming threat of higher U.S. tariffs under the Trump administration added further uncertainty to the market outlook. 

While copper started the fourth quarter of 2024 on a strong note, prices remained volatile throughout the period. Prices of copper fell nearly 12% in the fourth quarter, closing the quarter at around $4 per pound. Copper prices surged to a new record high of $5.24 per pound in late March 2025 as buyers stocked up the commodity amid concerns that President Trump could impose tariffs on copper, leading to a disruption in the global supply chain. However, prices have nosedived more than 20% since then to around $4.10 per pound amid demand worries due to tariffs, which have threatened to cause a broader slowdown globally. Copper prices are likely to remain under pressure over the near term amid tariff uncertainties. 

FCX’s FY25 Earnings Estimates Going Down

Freeport’s earnings estimates for 2025 have been going down over the past 30 days. The Zacks Consensus Estimate for 2025 has been revised lower over the same time frame. 

Find the latest earnings estimates and surprises on Zacks Earnings Calendar.

Image Source: Zacks Investment Research

A Look at FCX’s Valuation 

FCX is currently trading at a forward price/earnings of 16.35X, a roughly 1.7% discount to the industry average of 16.64X. The FCX stock is trading at a premium to BHP Group and Rio Tinto and a modest discount to Southern Copper.

FCX’s P/E F12M Vs. Industry, SCCO, BHP & RIO

Image Source: Zacks Investment Research

How Should Investors Play the FCX Stock?

FCX is poised to gain from progress in expansion activities that will boost production capacity. Robust financial health allows FCX to invest in growth projects and drive shareholder value. Despite these positives, declining earnings estimates, retreating copper prices and high production costs warrant caution. Holding onto this Zacks Rank #3 (Hold) stock will be prudent for investors who already own it.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Freeport-McMoRan Inc. (FCX) : Free Stock Analysis Report

BHP Group Limited Sponsored ADR (BHP) : Free Stock Analysis Report

Rio Tinto PLC (RIO) : Free Stock Analysis Report

Southern Copper Corporation (SCCO) : Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research