UBS maintains Buy on Freeport-McMoRan with steady target

UBS reaffirmed its Buy rating and $55.00 price target for Freeport-McMoRan (NYSE:FCX), a prominent mining company. The endorsement comes after a recent incident at one of the company's facilities.

A fire erupted in a section of the sulfuric plant at Freeport-McMoRan's new Manyar smelter in Indonesia on Monday. According to the report, the fire was contained to one area and did not spread to other parts of the facility. It has since been extinguished, but as a result, operations at the smelter have been halted temporarily.

The Manyar smelter, which Freeport-McMoRan has nearly finished constructing at a cost of $3.7 billion, is expected to process approximately 1.7 million tonnes of concentrate and produce around 480,000 tonnes of cathode. Its ramp-up was initially scheduled for the second half of 2024.

The company had previously announced in late September that a water leak would push the ramp-up schedule to November. The full implications of the fire on the smelter's operational timeline are still under assessment by Freeport-McMoRan, but further delays are anticipated.

Despite these setbacks, UBS's stance on Freeport-McMoRan remains unchanged, with the firm continuing to show confidence in the stock's potential. The company's assessment of the incident's impact on the smelter's ramp-up is ongoing.

Freeport-McMoRan, a leading copper producer, has been facing challenges at its Manyar smelter in Indonesia, with incidents including a fire and water leakage. However, Morgan Stanley maintains an Overweight rating and a $58.00 price target for the company, anticipating that the Indonesian government would likely grant an extension for Freeport-McMoRan's copper concentrate export permit.

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On the analyst front, UBS upgraded Freeport-McMoRan's stock from Neutral to Buy, raising the price target to $55.00, citing strong industry fundamentals and the company's correlation to copper prices. Scotiabank adjusted its price target for the company to $58.00, maintaining a Sector Outperform rating, following the company's strong second quarter results and the resumption of its share buyback program.

InvestingPro Insights

Despite the recent setback at Freeport-McMoRan's (NYSE:FCX) Manyar smelter, the company's financial health appears robust, as reflected in the latest InvestingPro data. With a market capitalization of $70.2 billion, FCX maintains a strong position in the Metals & Mining industry. The company's revenue growth of 12.73% over the last twelve months and a quarterly growth of 15.46% in Q2 2024 demonstrate its ability to expand despite operational challenges.

InvestingPro Tips highlight that FCX's cash flows can sufficiently cover interest payments, and its liquid assets exceed short-term obligations, suggesting financial stability even as it navigates the recent fire incident. This aligns with UBS's maintained Buy rating and $55.00 price target.

However, investors should note that FCX is trading at a high earnings multiple, with a P/E ratio of 36.39. This valuation may already factor in future growth expectations, including the anticipated production from the Manyar smelter once operational.

For those seeking a more comprehensive analysis, InvestingPro offers 11 additional tips on Freeport-McMoRan, providing deeper insights into the company's financial position and market performance.

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