Is Freeport-McMoRan On Its Way to Former Highs?

With shares of Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX) trading at around $35.40, is RF an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for the Stock’s Movement

Freeport-McMoRan is up over 5 percent today after beating expectations and offering strong guidance. Q4 EPS was $0.78. Q4 revenue was $4.50 billion. FY2012 EPS was $3.19. Most importantly, gold sales are expected to increase 37 percent, and copper sales are expected to increase 18 percent in 2013.

Gold and copper prices were lower in 2012, but lower prices were offset by high volumes. Freeport-McMoRan sold 972 million pounds of copper in Q4, which beat expectations of 930 million ponds. Gold production was up 39 percent to 251,000 ounces.

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Freeport-McMoRan made two large investments in 2012, which included Plains Exploration & Production Co. (NYSE:PXP) and McMoRan Exploration Co. (NYSE:MMR). This was done in an attempt to get involved in the energy business. Freeport-McMoRan investors were none too pleased with the news. They felt that these investments would only act as distractions, and that they were too expensive in the first place. This means that Freeport-McMoRan is not likely to make any similar purchases in the near future. Yes, investors have that much power at times.

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What these same investors must realize is that Freeport-McMoRan made these moves for a reason, which relates to a slowing copper business. Mines are aging, ore grades are declining, and costs are rising. If Freeport-McMoRan can establish itself in the energy business now, it could pay off handsomely in the future. These large investments aren’t sure bets, but the rewards are potentially tremendous.

Now let’s take a look at some important numbers for Freeport-McMoRan…