Deutsche Bank Cuts Price Target on Freeport (FCX) to $36

Deutsche Bank lowers its price target on Freeport-McMoRan Copper & Gold (NYSE: FCX) from $77 to $36. The firm reiterated its Hold rating.

Following Freeport's Q3 earnings disappointment, reported yesterday before the market opened, and given a weaker outlook for metals, the firm believes Freeport will report losses in Q4.

Deutsche points out that "given the 3-month plunge in copper prices from high’s near US$4/lb to ~US$2/lb at present, Freeport is no longer generating free cash flow and net debt level of $6 billion now appears high in light of 4Q08E EBITDA as low as ~$550 million and capex of ~$700 million." The firm believes that Freeport will need to "make some hard decisions" and either drastically reduce capex or cut its $0.50/share quarterly dividend.

Notably, Deutsche lowered its global commodity view, accounting for a "global recession scenario", and cut its outlook for copper to $1.89/lb in '09 and to $2.15/lb in '10. The firm also sees lower gold and molybdenum prices, and, accordingly, Deutsche cut its FY09 EPS estimate on Freeport-McMoRan to $1.38 and its FY10 estimate to $3.60. The Street is currently expecting FY09 EPS of $7.80. Deutsche believes that given global growth concerns, "it will be difficult for metals to rally..."

After falling more nearly 11% yesterday, shares of Freeport are once again tacking on double-digit percentage losses this morning. The stock most recently traded at $29.36, down 10.2% from yesterday's close. Freeport stock hit a new 52-week low this morning when its price went as low as $29.13.

Freeport-McMoRan Copper & Gold, Inc. engages in the exploration, mining, and production of mineral properties primarily in Indonesia, North America, South America, and Africa.

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