Freeport-McMoRan Inc.

Freeport-McMoRan, Inc. (NYSE: FCX) operates through large, long-lived, geographically diverse assets with significant proven and probable mineral reserves of copper, gold and molybdenum. The company’s portfolio of assets includes the Grasberg minerals district in Indonesia, one of the world’s largest copper and gold deposits, and significant mining operations in North America and South America,

Key Highlights

• Lower profitability margins on Q-o-Q basis: In Q4FY21, the company witnessed margin pressure due to higher input costs, and continuation of the above trend might impact the upcoming performances as well. In Q4FY21, the company reported its gross margin and EBITDA margin of 39.6% and 46.3%, respectively, lower than 41.6% and 48.2%, respectively in Q3FY21. Moreover, net margin deteriorated to 21.9% in Q4FY21 from 28.5% in Q3FY21.
• Lengthy cash cycle days: The company takes ample time to convert its investment to cash flows a reported cash conversion period of 129.4 days in Q4FY21, as compared to the industry median of 53.2 days. A higher cash conversion period denotes weak operational efficiency and remains a key concern.
• Stretched balance-sheet: At the end of Q4FY21, the company reported a higher debt to equity ratio of 0.68x, as compared to the industry median of 0.22x. A higher ratio denotes lower financial flexibility. Moreover, the company is prone to a higher balance-sheet risk, as its long-term debt to total capital stood at 28% in Q4FY21, significantly higher than the industry median of 13.6%.

Stock Recommendation:

For FY22, the company expects its copper production of ~4.3 billion pounds (v/s 3.8 billion pounds in FY21), while gold production is expected at 1.6 million ounces (v/s 1.38 million ounce in FY20). Moreover, the management is targeting to produce 80 million pounds of molybdenum in FY22 (v/s 85 million pounds in FY21). Due to a positive FY22 guidance, the stock price moved ahead of its fundamentals and the stock price surged ~24% and ~37%, respectively, in the last one month and three months, respectively. Moreover, the stock of FCX is available at a higher valuation of price to earnings multiples of 11.7x on NTM basis, as compared to the industry (Metals & Mining) median of 3.8x. Hence, considering the aforesaid facts, we give a ‘Watch’ stance on the stock of FCX at the closing price of USD 47.71 on March 10, 2022.

One-Year Technical Price Chart (as on March 10, 2022). Analysis by Kalkine Group

Technical Analysis Summary

Note: Investors can evaluate the stock based on the support and resistance levels provided in the report in case of keen interest taking into consideration the risk-reward scenario.

Meridian Bioscience Inc.

Meridian Bioscience Inc. (NASDAQ: VIVO) is a life science company, which is engaged in the development, manufacturing, sale and distribution of diagnostic test kits, primarily for across specific gastrointestinal and respiratory infectious diseases and elevated blood lead levels. The Company operates through two segments, namely Diagnostics and Life Science.

Key Updates:

• Sluggish Q1FY22 performance: For Q1FY22, the company reported a 5% y-o-y decline in top-line to USD 88.3 million. On the other hand, operating income slide to USD 20.5 million, reflecting a 44% y-o-y decline over Q1FY21. The company also reported a lower operating margin of 23% in Q1FY22, as compared to 40% in pcp.

• Lengthy cash conversion period: The company reported its cash conversion period of 193.3 days in Q1FY22, which is significantly higher than the industry median of 169.2 days. A higher conversion period denotes weak operational efficiency, as the company takes longer time to convert its investments to cash flows.
  

• Recent Update: During Q1FY22, the company launched Lyo-Ready™ sample specific master mixes for saliva. The company received FDA EUA approval for Revogene® SARS-CoV-2 assay.

Stock Recommendation:

In Q1FY22, the company reported a 12% y-o-y decline in income from its Life Science segment, due to depressing performance from Molecular reagents segment (down 32% on y-o-y). Moreover, the company’s bottom-line fell to USD 15.5 million in Q1FY22, as compared to USD 28.4 million in Q1FY21. Continuation of the above trend is likely to dampen the upcoming performance. However, consolidated net revenue is expected in between USD 315 to USD 330 million in FY22. The stock of VIVO is trading at a higher valuation of EV to EBITDA of 10.1x on a TTM basis, as compared to the industry (Healthcare Equipment & Supplies) median of 8.1x. Hence considering the aforesaid facts, we give a ‘Watch’ stance on the stock of VIVO at the closing price of USD 25.34 on March 10, 2022.

1-Year Technical Price Chart (as on March 10, 2022).Source: REFINITIV, Analysis by Kalkine Group

Technical Analysis Summary

Note: Investors can evaluate the stock based on the support and resistance levels provided in the report in case of keen interest taking into consideration the risk-reward scenario.