Freeport-McMoRan (FCX) PT Raised to $18 at UBS on Copper Outlook, But Grasberg Risk Remains

December 1, 2016 6:56 AM EST
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Price: $15.19 --0%

Rating Summary:
    12 Buy, 15 Hold, 5 Sell

Rating Trend: Down Down

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UBS analyst Andreas Bokkenheuser raised its price target on Freeport-McMoRan (NYSE: FCX) to $18.00 (from $11.00) but maintained a Neutral rating. The analyst notes the copper outlook improves, but Grasberg uncertainly remains.

The firm upgrades it 2017-18 copper price from US$2.30/lb and US$2.60/lb to US$3.00/lb and US$3.25/lb respectively.

Bokkenheuser comments, "Collectively the copper industry has moved from a growth or volume footing in 2012-14 towards a value or cost out focus now. We think there is an ongoing focus from companies to reduce headcount, squeeze suppliers and lift efficiencies. But offsetting this, oil and producer currency moves are potentially reintroducing inflation"

That said, the analyst notes Grasberg downside remains a risk. "The market continues to assume a small contract delay at the Grasberg mine and possibly a divestment discount to fair market value, in our view. This is one of five primary Grasberg scenarios of different likelihood. Among the most likely, the best case values Freeport at close to ~US$14/share. The best case remains the basis of our valuation due to ongoing (albeit slow) negotiation progress. The worst case scenario has 40% downside risk assuming full divestment at replacement value, but is also the least likely outcome."

For an analyst ratings summary and ratings history on Freeport-McMoRan click here. For more ratings news on Freeport-McMoRan click here.

Shares of Freeport-McMoRan closed at $15.35 yesterday.

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