Copper is one of the most widely used metals in the world. Moreover, its demand is increasing amid the growing green energy market. Goldman Sachs Group Inc. (GS) believes in a “clear structural bull story” for copper and expects its prices to hit $15,000 per MT in 2025.
The global copper market is expected to reach $394.21 billion metric tons by 2029, growing at a CAGR of 4.2% between 2022 and 2029. Given this backdrop, fundamentally strong copper stocks BHP Group Limited (BHP) and Vale S.A. (VALE) might be solid buys now.
However, recessionary concerns and the Fed’s aggressive rate hikes might have a negative impact on copper prices in the near term. And we think it might be best to wait for a better entry point in copper stock Freeport-McMoRan Inc. (FCX).
Stock to Hold:
Freeport-McMoRan Inc. (FCX)
FCX mines mineral properties in North America, South America, and Indonesia. The company primarily explores copper, gold, molybdenum, silver, and other metals, as well as oil and gas.
On June 22, FCX declared dividends of $0.15 per share on FCX’s common stock, which was payable to shareholders on August 1. This reflects the stable cash position of the company.
FCX’s revenues came in at $5.42 billion for the second quarter of 2022, ended June 30, representing a 5.8% year-over-year decline. Its cash, cash equivalents, restricted cash, and restricted cash equivalents balance grew 48.3% from the prior-year quarter to $9.75 billion, while its adjusted net income attributable to common stock declined 25% from the same quarter last year to $854 million. The EPS decreased 24.7% from the prior-year quarter to $0.58.
Analysts expect FCX’s revenue for the fiscal year ended December 2022 to be $23.10 billion, indicating a 1.1% year-over-year growth. The company’s EPS for the same year is expected to decrease 13.2% from the prior year to $2.72. However, FCX has topped consensus EPS estimates in three of the trailing four quarters, which is impressive.
FCX’s stock has declined 33.8% over the past six months to close its last trading session at $31.05. However, it has gained 9.5% over the past five days.
The stock’s overall C rating equates to Neutral in our proprietary POWR Ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
FCX has a C grade for Value, Momentum, Stability, and Sentiment. It is ranked #21 out of the 37 stocks in the B-rated Industrial – Metals industry.
Beyond what we’ve stated above, we have also given FCX grades for Growth and Quality. Get all FCX ratings here.
Stocks to Buy:
BHP Group Limited (BHP)
Headquartered in Melbourne, Australia, BHP operates as a resources company through its Copper; Iron Ore; and Coal segments. The company explores, develops, and produces metals and coal.
On August 30, BHP announced an agreement with Caterpillar Inc. (CAT) and Finning International Inc. to replace BHP’s entire haul truck fleet at the Escondida mine, located in northern Chile. This agreement, part of the strategic equipment renewal process developed by Escondida, is expected to generate a positive impact on key initiatives such as decarbonization, autonomous technologies, and the development of local capabilities.
For the year ended June 30, 2022, BHP’s profit from continuing operations came in at $34.11 billion, representing a 33.7% year-over-year growth. Its total attributable profit grew 173.4% from the prior-year period to $30.90 billion, while its total net operating cash flows rose 13.1% from the same period the prior year to $29.29 billion. The EPS increased 173.2% from the prior-year period to 610.60 cents.
Analysts expect BHP’s EPS for the year ending June 2023 to be $5.13, indicating a 9% year-over-year growth. The company’s revenue for the same year is expected to be $55.65 billion.
BHP has gained 6.5% over the past five days to close its last trading session at $52.18.
BHP’s POWR Ratings reflect this promising outlook. The company has an overall rating of B, which translates to Buy in our proprietary rating system.
BHP has an A grade for Quality and a B grade for Value. It is ranked #5 in the Industrial – Metals industry. Click here to see the additional POWR Ratings for BHP (Growth, Momentum, Stability, and Sentiment).
Vale S.A. (VALE)
VALE produces and sells iron ore and iron ore pellets for use as raw materials in steelmaking in Brazil and internationally. The company operates through Ferrous Minerals and Base Metals segments. The company is headquartered in Rio de Janeiro, Brazil.
On August 17, VALE announced industrial-scale production of Sustainable Sand at its Viga mine in Congonhas, Minas Gerais (Brazil), in the second half of this year. With a capacity to process 200,000 tons of sand per year, it is expected to produce 80,000 tons in 2022. Obtained from the treatment of iron ore tailings, Sustainable Sand is one of the company’s initiatives to reduce the use of dams in its operations in Minas Gerais.
In July, VALE announced that together with its partners Posco Holding Inc. and Dongkuk Steel Mill Co., Ltd, it had entered into a binding agreement with ArcelorMittal (MT) to sell their respective stakes in Companhia Siderúrgica do Pecém (CSP). This is expected to help the company simplify its portfolio and focus on its core businesses.
VALE’s net operating revenue increased 3.2% from its previous quarter to $11.16 billion in the second quarter ended June 30. Its net cash provided by operating activities grew 36.9% from the prior-quarter value to $3.57 billion, while its net income attributable to VALE stockholders improved 38% sequentially to $6.15 billion. The company’s earnings per common share increased 41.9% from the prior quarter to $1.32.
The consensus EPS is estimated to be $3.55 for the fiscal year ending December 2022. The consensus revenue is expected to be $45.96 billion for the same period.
The stock has gained 7.1% over the past five days to close its last trading session at $13.15.
It is no surprise that VALE has an overall B rating, which translates to Buy in our POWR Rating system. The stock also has a B rating in Value and Quality. It is ranked #12 in the same industry.
To see additional POWR Ratings for Growth, Momentum, Stability, and Sentiment for VALE, click here.
Want More Great Investing Ideas?
BHP shares were trading at $51.93 per share on Wednesday afternoon, down $0.25 (-0.48%). Year-to-date, BHP has gained 7.73%, versus a -16.71% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities. More...
More Resources for the Stocks in this Article
|Ticker||POWR Rating||Industry Rank||Rank in Industry|
|BHP||Get Rating||Get Rating||Get Rating|
|VALE||Get Rating||Get Rating||Get Rating|
|FCX||Get Rating||Get Rating||Get Rating|