Deutsche Bank Upgrades Freeport-McMoRan (FCX) to Buy, Oil & Gas Deal Upside Offsets Negatives

December 20, 2012 7:20 AM EST Send to a Friend
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Price: $22.82 +3.12%

Rating Summary:
    20 Buy, 8 Hold, 0 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 21 | Down: 42 | New: 52
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Deutsche Bank upgraded Freeport-McMoRan (NYSE: FCX) from Hold to Buy with a price target of $40.00 after reinstating coverage.

The firm comments, "Freeport's $20bn move into energy was a shock (FCX -20% in 2 days) due to unexpectedness, high leverage, unclear industrial rationale, premiums paid and potential conflicts of interest but we believe investors will eventually move past "anger" and to "acceptance" as we assume the deal will go through and the share price decline over-penalizes the stock. Our downgrade to Hold on December 5th was driven by the aforementioned factors, however, based on a better understanding of deal mechanics and implied resource upside, we now believe upside is possible and re-instate our former Buy while retaining our $40/share PT (now based on 9x revised 2014E EPS).

While management remains committed to its copper strategy, we view move into O&G as a leveraged financial play to "engineer" a higher corporate growth rate with an exploration upside kicker on GoM assets if management’s vision proves right."

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 $33.95 yesterday.


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