Earnings Preview: Freeport-McMoRan Copper & Gold 1Q out Weds

OVERVIEW: Freeport-McMoRan, which is also a major gold mining company and the world's top molybdenum producer, is benefiting from a tight global supply for copper. A strike by mine workers in Chile, the world's primary copper-producing nation, is supporting the price of the commodity. Chile also is experiencing a power shortage, which limits the state-owned copper producer's ability to increase output.

Freeport-McMoRan's debt reduction efforts since buying rival Phelps Dodge last year for $25.9 billion are paying off. Earlier this month, Fitch Ratings upgraded the issuer default rating and debt ratings of the Phoenix company, citing the company's cash flow and earnings potential in 2008. The ratings agency said the company should have a positive cash flow in 2008, and metals prices will likely continue to rise throughout the year to drive earnings. The outlook on Fitch's ratings is stable.

BY THE NUMBERS: Analysts polled by Thomson Financial expect, on average, earnings per share of $2.09 and revenue of $4.64 billion. In the year-earlier period the company posted profit, after paying preferred dividends, of $251.7 million, or $1.23 per share, on revenue of $1.09 billion.

ANALYST TAKE: In March, Friedman, Billings, Ramsey analyst Amir Arif downgraded the shares to "Market Perform" from "Outperform" citing concerns the stock price had risen too high. But Goldman Sachs analyst Oscar Cabrera, who has a "Buy" rating on the shares, said this month that they "offer one of the best risk/reward profiles in our base metal coverage universe."

WHAT'S AHEAD: Investors will keep watching metals prices and the possibility that the U.S. economy's slowdown may have bottomed. Any increase in domestic demand for copper could boost Freeport-McMoRan's shares. Copper inventories, meanwhile, will start to build in the second quarter of this year, as many previously shut-in Chinese smelters ramp output, FBR's Arif said. Investors also will be watching as the company pushes ahead with plans to restart a huge molybdenum prospect in Colorado.

STOCK PERFORMANCE: Freeport-McMoRan shares fell 6 percent to close at $96.22 on March 31. The stock has since rebounded, finishing Friday's trading at $113.89.