The Zacks Analyst Blog Highlights: Charles Schwab Corporation, Raymond James Financial, Freeport-McMoRan Copper & Gold, Newmont Mining and Southern Copper

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Jul 19, 2011, 09:30 ET

CHICAGO, July 19, 2011 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Charles Schwab Corporation (NYSE: SCHW), Raymond James Financial Inc. (NYSE: RJF), Freeport-McMoRan Copper & Gold Inc. (NYSE: FCX), Newmont Mining Corp. (NYSE: NEM) and Southern Copper Corp. (NYSE: SCCO).

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Here are highlights from Monday's Analyst Blog:

Charles Schwab Reports In-Line

Charles Schwab Corporation's (NYSE: SCHW) second quarter 2011 earnings came in at 20 cents per share, in-line with the Zacks Consensus Estimate. However, this compares favorably with the year-ago quarter's earnings of 17 cents.

Charles Schwab's net income for the reported quarter came in at $238 million, up 16% from $205 million in the prior-year quarter.

Charles Schwab's results benefited from improved net interest revenue and lower impairment losses on securities. However, lower trading revenue and higher non-interest expenses were the downside.

Quarter in Detail

Net revenue for the reported quarter was $1,190 million, down 1% from $1,207 million in the prior quarter but up10% from $1,080 million in the prior-year quarter. This also compares favorably with the Zacks Consensus Estimate of $1,188 million. The substantial year-over-year increase was primarily attributable to growth in net interest revenue as well as asset management and administration fees.

Charles Schwab's average interest-earning assets for the reported quarter increased 21% year over year to $91.9 billion.

Total non-interest expense dipped 1% sequentially but increased 8% year over year to $804 million. The year-over-year increase was primarily a result of higher compensation and benefits, professional services fee and class action litigation charge.

Charles Schwab's pre-tax profit margin improved significantly to 32.4% from 31.3% in the prior-year quarter.

As of June 30, 2011, Charles Schwab had total client assets of $1.66 trillion (up 1% sequentially and 22% year over year). New client assets decreased 33% sequentially to $15.4 billion. New brokerage accounts were 205,000, down 8% sequentially.

As of June 30, 2011, Charles Schwab had a total of 8.1 million active brokerage accounts, 745,000 banking accounts and 1.43 million corporate retirement plan participants.

Annualized return on equity (ROE) as of June 30, 2011, came in at 14%, down from 15% in the prior-quarter and flat year over year.

Our Viewpoint

While a focus on lower-cost capital structure will boost results in the upcoming quarters, the company's financials will continue to be impacted by lower trading activity and volatile interest rates. However, after the completion of the optionsXpress acquisition, the company's top line is expected to benefit from increased trading in derivatives.

Charles Schwab currently retains a Zacks #5 Rank, which translates into a short-term 'Strong Sell' rating. However, Charles Schwab's competitor Raymond James Financial Inc. (NYSE: RJF) retains a Zacks #4 Rank (a short-term 'Sell' rating).

Earnings Preview: Freeport-McMoRan

Metals and mining powerhouse Freeport-McMoRan Copper & Gold Inc. (NYSE: FCX) announced that it would release its results for the second quarter of 2011 before the market opens on July 21, 2011.

FCX earned a profit of $1.57 per share in the first quarter of 2011, outshining the Zacks Consensus Estimate of $1.26. In the upcoming quarter, the Zacks Consensus Estimate for Freeport is pegged at a profit of $1.38 per share, reflecting an annualized growth rate of 84.72%. The downside potential of the estimate, essentially a proxy for future earnings surprises, is 4.35%.

With respect to earnings surprises, the company outdid the Zacks Consensus Estimate in the trailing four quarters. This is reflected in the average earnings surprise of 15.63%, with positive surprises in each of the quarters involved.

First Quarter Review

Freeport posted excellent net income of $1.5 billion or $1.57 per share in the first quarter of 2011, beating the Zacks Consensus Estimate of $1.26 per share.

Quarterly revenues of $5.7 million surpassed the Zacks Consensus Estimate of $5.39 million and was up 30.9% year over year.

However, copper sales volumes plunged 3.5% year over year in the quarter to 926 million pounds, while gold sales volumes were almost flat at 480,000 ounces. Molybdenum sales volumes of 20 million pounds were up by 17.6% year over year.

Net cash cost per unit in the quarter decreased 3.7% to 79 cents per pound versus 82 cents in the first quarter of 2011. Operating cash flows of $2.4 billion for first-quarter 2011 increased by a robust 29.8% from $1.8 billion as of March 31, 2010. Capital expenditures totaled $505 million for the first quarter of 2011.

As of March 31, 2010, total debt was approximately $4.8 billion.

Agreement of Estimate Revisions

Three out of the 13 analysts covering the stock for the second quarter of fiscal 2011 have made an upward revision in the last 30 days and among them 1 has made a revision in the last 7 days. Apart from 4 analysts who have made a downward revision in the last 30 days, 1 among them has made a revision in the last 7 days.

Magnitude of Estimate Revisions

The second quarter 2011 estimate decreased by a penny to $1.38 per share from $1.39 per share in the last 7 days and decreased by 7 cents per share in the last 30 days from $1.45 per share to $1.38 per share. The Zacks Consensus Estimate for the second quarter is 84.72% higher than the year-ago profit of 75 cents per share.

Our Take

We are optimistic about Freeport's African Tenke Fungurume copper mining operations, which will optimize costs for Freeport on reaching full production capacity. Rising copper prices, driven by Chinese stockpiling, bode well for the company.

In 2011, Freeport expects to sell 3.9 billion pounds of copper, 1.6 million ounces of gold and 73 million pounds of molybdenum. For the upcoming quarter, the company projects sales of 965 million pounds of copper, 365 thousand ounces of gold and 17 million pounds of molybdenum. The company expects average copper prices of $4.25 per pound, $1,400 per ounce of gold and $15 per pound of molybdenum for fiscal year 2011.

However, unit net cash costs for 2011 are expected to be higher than 2010, due primarily to the impact of higher unit net cash costs at Grasberg. Unit costs are likely to rise in each of Freeport's copper-producing segments, reflecting higher input costs. Indonesian operations will likely see the most significant year-over-year increase on a per unit basis due to the drop in volumes that will lessen the ability to absorb the operation's high fixed costs.

Thus Freeport has a short-term (1 to 3 months) Zacks #3 Rank (Hold) and a long-term Neutral recommendation.

The company faces stiff competition from Newmont Mining Corp. (NYSE: NEM) and Southern Copper Corp. (NYSE: SCCO).

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