Freeport-McMoRan Inc. (NYSE:FCX)

The financial data reveals several notable trends related to profitability, capital efficiency, and overall economic performance over the five-year period analyzed.

Net Operating Profit After Taxes (NOPAT)

NOPAT showed a significant increase from 2020 to 2021, surging from approximately $1.7 billion to over $6.1 billion. This peak was followed by a decline in subsequent years, with NOPAT decreasing to around $5.1 billion in 2022, then further dropping to approximately $4.6 billion in 2023 and $4.5 billion in 2024. Although the profit remained above the 2020 level during these years, the downward trend after 2021 suggests diminishing operational profitability.

Cost of Capital

The cost of capital remained relatively stable over the period, fluctuating slightly between approximately 19.95% and 20.88%. This consistency indicates that the company's hurdle rate or required return on invested capital was largely unchanged, reflecting stable market and risk perceptions.

Invested Capital

Invested capital steadily increased from about $32.2 billion in 2020 to a peak of roughly $36 billion in 2022. Following this, a gradual decline occurred, with invested capital falling to approximately $35.1 billion in 2023 and $33.9 billion in 2024. This suggests a period of capital expansion until 2022, followed by a modest reduction or divestment.

Economic Profit

Economic profit, which reflects the value created beyond the cost of capital, remained negative throughout the five years under review. It improved significantly from a substantial loss of approximately $4.7 billion in 2020 to a smaller loss of about $1.1 billion in 2021. However, economic profit then deteriorated again, with losses increasing to roughly $2.4 billion in 2022 and remaining in the negative range through 2023 and 2024, at approximately $2.7 billion and $2.5 billion respectively. Despite the 2021 improvement, the sustained negative economic profits imply that the company has not consistently generated returns exceeding its capital costs.

In summary, while operational profitability peaked in 2021 and invested capital expanded until 2022, the company has faced challenges in maintaining these gains, as evidenced by declining NOPAT and persistently negative economic profits in later years. The stable cost of capital underscores that these issues are likely linked to operational or market factors rather than changes in financing costs. Overall, the data suggests a need for strategic review to enhance value creation relative to invested capital.

Net Income Attributable to Common Stockholders

The net income attributable to common stockholders showed a significant increase from 599 million USD in 2020 to a peak of 4306 million USD in 2021. However, after this peak, net income declined to 3468 million USD in 2022 and continued to decrease further to 1848 million USD in 2023. There was a slight recovery in 2024, with net income rising marginally to 1889 million USD. Overall, the data indicates a pronounced volatility with a substantial peak in 2021 followed by a consistent downward trend in the subsequent years through 2024.

Net Operating Profit After Taxes (NOPAT)

The net operating profit after taxes also demonstrated a strong upward movement from 1698 million USD in 2020 to 6188 million USD in 2021. Following this, NOPAT experienced a decline to 5116 million USD in 2022 and a further decrease to 4632 million USD in 2023. By 2024, NOPAT slightly decreased again to 4538 million USD. Despite the reductions after 2021, NOPAT levels remained substantially higher than the 2020 baseline, signifying an overall improved operating profitability compared to the start of the period.

General Observations

Both net income and NOPAT peaked in 2021, indicating a year of exceptional profitability. Post-2021, both metrics declined, with net income showing a sharper drop compared to NOPAT. This divergence suggests that factors affecting net income beyond operating performance, such as non-operating expenses or one-time gains/losses, could have influenced net income volatility. Despite declines, the company maintained profitability above initial 2020 levels over the five-year span. The slight uptick in net income in 2024 may hint at stabilization or recovering profitability after several years of decrease.

The financial data reveals trends in the provision for income taxes and cash operating taxes over a five-year period ending December 31, 2024.

Provision for Income Taxes

There is a notable increase from 944 million US dollars in 2020 to 2299 million in 2021, indicating a sharp rise in tax provisions. The figures then remain relatively stable around the 2200-2270 million range for the years 2022 and 2023. In 2024, a further increase to 2523 million is observed, suggesting continuing growth in tax obligations.

Cash Operating Taxes

This category exhibits a significant surge from 774 million US dollars in 2020 to 2217 million in 2021, reflecting a major increase in cash tax payments. There is a slight downward trend in 2022 and 2023, with cash operating taxes recorded at 2088 million and 2009 million respectively. However, in 2024, a sharp rise occurs, reaching 2672 million, surpassing previous years' levels.

Overall, the trends indicate a substantial increase in both provision for income taxes and cash operating taxes starting in 2021. While the provision for income taxes shows a steady upward trend after 2021, cash operating taxes display more variability with a dip in the middle years followed by a significant rebound in 2024. This pattern may reflect changes in the company's profitability, tax strategies, or external tax environment impacting its tax liabilities and payments.

The financial data reveals several key trends regarding the company’s capital structure and equity position over the five-year period.

Total Reported Debt & Leases

The total reported debt and leases show fluctuation but overall a slight decrease from 2020 to 2024. After peaking in 2022 at 10,952 million USD, the debt level declines to 9,738 million USD by the end of 2024. This suggests an effort to reduce debt or improve debt management after a temporary increase in 2022.

Stockholders’ Equity

Stockholders’ equity demonstrates consistent growth year over year. Starting at 10,174 million USD in 2020, it rises steadily to reach 17,581 million USD in 2024. This upward trend indicates strengthening equity, possibly due to retained earnings growth, issuing equity, or increased profitability enhancing the company’s net asset base.

Invested Capital

Invested capital increases from 32,173 million USD in 2020 to a peak of 36,035 million USD in 2022, followed by a decline to 33,889 million USD in 2024. The increase up to 2022 may reflect expanded operational assets or investment in capital projects, while the subsequent decline suggests divestitures, asset sales, or depreciation outpacing new investments.

Overall, the data reflects a company focused on strengthening equity while managing debt levels relatively stable after a notable increase in 2022. Investment in capital assets has peaked and begun to recede moderately, indicating possible strategic shifts in capital allocation or operational adjustments during the latter years.

Economic Profit

The economic profit shows a negative trend throughout the five-year period, indicating consistent losses in terms of economic value added. In 2020, the company experienced a substantial economic loss of $4,720 million, which improved significantly in 2021 to a loss of $1,101 million. However, from 2022 onward, economic profit deteriorated again, with losses of $2,386 million in 2022, $2,669 million in 2023, and $2,540 million in 2024. The data suggests some recovery after 2020 but persistent negative economic profit in subsequent years.

Invested Capital

Invested capital shows a moderate increase from 2020 to 2022, rising from $32,173 million to $36,035 million. From 2023 onwards, invested capital begins to decline slightly, falling to $35,126 million in 2023 and further to $33,889 million in 2024. This pattern indicates capital deployment growth initially, followed by a gradual reduction or divestment in later years.

Economic Spread Ratio

The economic spread ratio remains negative over all observed years, indicating that the return on invested capital is consistently below its cost. The ratio improves somewhat from -14.67% in 2020 to -3.14% in 2021 but worsens again to -6.62% in 2022 and further declines to -7.6% in 2023. The 2024 ratio shows marginal improvement to -7.5%. Overall, the economic spread ratio highlights ongoing challenges in generating returns that exceed capital costs.

Summary of Trends

Overall, the data exhibits a company struggling to achieve positive economic profit and an economic spread ratio above zero, implying its invested capital is not yielding returns higher than its costs. After a severe economic loss in 2020, there was a brief improvement in 2021, but subsequent years revealed a regression with continued economic losses and negative spread ratios. Invested capital trends suggest initial expansion or investment followed by a period of consolidation or capital reduction. These patterns suggest ongoing operational or market challenges impacting economic profitability despite substantial invested capital.

Adjusted Revenues

The adjusted revenues demonstrated a significant upward trend over the analyzed period. Starting from approximately $14.3 billion at the end of 2020, revenues increased sharply to nearly $23 billion by the end of 2021. This elevated level was generally maintained through 2022 and 2023, with slight fluctuations. By the end of 2024, adjusted revenues reached the highest point of around $25.4 billion, indicating robust growth in top-line performance across these years.

Economic Profit

Economic profit figures remained negative throughout the period, indicating the company did not generate value over and above its cost of capital during these years. The loss reached its peak in 2020 at approximately -$4.7 billion. There was a considerable reduction in economic loss by the end of 2021, narrowing to about -$1.1 billion. However, from 2022 onward, economic profit deteriorated again, increasing losses to around -$2.4 billion in 2022, and further to approximately -$2.7 billion in 2023. A slight improvement was observed in 2024, where losses decreased marginally to about -$2.5 billion, yet economic profit remained substantially negative.

Economic Profit Margin

The economic profit margin followed a trend parallel to economic profit, consistently staying in negative territory. The margin rose significantly from -33.12% in 2020 to -4.79% in 2021, reflecting a substantial improvement in profitability relative to revenues. Nonetheless, the margin worsened again in the subsequent years, declining to -10.53% in 2022 and further to -11.63% in 2023. By the end of 2024, there was a slight improvement to -10.01%, indicating a persistent challenge in generating positive economic returns despite growing revenues.

Overall Analysis

Despite consistent growth in adjusted revenues throughout the period, the company struggled to translate this growth into positive economic profit. The economic profit remained negative by a significant margin each year, although there was a notable improvement in 2021. The inability to sustain this improvement in economic returns suggests operational or cost-related challenges that erode profitability. The persistent negative economic profit margin highlights that the company's cost of capital is not being sufficiently covered by its earnings, which may necessitate strategic focus on improving operational efficiency or capital allocation to enhance long-term value creation.