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Quick take on Freeport McMoRan, Brookfield Asset Management, Manulife Financial

November 07, 2010 | About:
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Gordon Pape

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Freeport McMoRan moves through US$100. The share price of copper and gold producer Freeport McMoRan (FCX) moved through the $100 barrier last week, a level it hasn't seen since July 2008. The company has benefitted from renewed interest in copper, which some observers are saying could rise as much as 50% over the next year (it has gained 17.4% so far in 2010).

On Oct. 21, FCX reported third-quarter earnings of $1.2 billion ($2.49 a share, figures in U.S. dollars) compared to $925 million ($2.07 per share) last year. For the first nine months of the 2010 fiscal year, the company earned $5.88 a share, up 59% from 2009.

The stock was recommended by contributing editor Glenn Rogers in February at $73.68. It closed on Friday at $104.84 for a gain to date of 42.3%. Glenn will provide a full update in his next column.

Brookfield reports strong quarter. Brookfield Asset Management (TSX: BAM.A, NYSE: BAM) reported strong third-quarter results on Friday and the stock moved higher in response.

The company, which now uses the International Financial Reporting Standard (IFRS) said it earned $342 million (16c a share) in the three months to Sept. 30. That compares to a loss of $572 million (75c per share) in the same period of 2009 when BAM took a write down of $873 million on its office properties. Note that the company reports its results in U.S. currency.

Cash flow from operations for the quarter increased to $354 million (57c per share) from $149 million (24c per share) in the third quarter of 2009, prior to realization gains. The company credited the strong performance to good results from the commercial office business and better returns from infrastructure operations due to improving economic conditions.

Brookfield shares were higher by 90c in Toronto to end the week at $31.55. The closing price in New York was US$31.56. We continue to rate Brookfield as a Buy.

Good results from SNC-Lavalin. We also saw a good third-quarter report from Montreal-based construction firm SNC-Lavalin (TSX: SNC, OTC: SNCAF). The company beat analysts' estimates with a profit of $128.2 million (84c a share), up from $103.1 million (68c a share) in the same period a year ago. Analysts had been looking for 72c a share.

For the first nine months of the 2010 fiscal year, SNC said that net income increased by 14.3% to $297.9 million ($1.96 per share) compared to $260.7 million ($1.72 per share) for the same period in 2009. However, revenue for the period was down slightly, from $4.5 billion to $4.4 billion.

The company said its revenue backlog increased to $12.7 billion at the end of September compared to $11.4 billion at the end of June and $10.8 billion at the end of December 2009.

Investors reacted positively to the results, driving up the stock by $1.30 a share on the TSX on Friday to close at $53.99. SNC-Lavalin also trades in the U.S. on the over-the-counter Grey Market. It closed there on Friday at US$53.60.

The stock was originally recommended in the IWB by contributing editor Tom Slee in May 2006 at $32.46. A more detailed update will appear in a future issue. In the meantime, we are maintaining a Buy recommendation on the stock.

Manulife loses, shares jump. Manulife Financial (TSX, NYSE: MFC) reported a third-quarter loss of almost $1 billion before the opening bell on Thursday and the shares proceeded to rise by $1.21 (9.4%) during the day's trading session.

The reason for the positive market reaction was that the losses related to one-time non-cash charges: $1 billion resulting from a write-down of good will plus a charge of about $2 billion relating to revised and updated actuarial assumptions.

There were several positives in the report, including a 50% increase in insurance sales in Asia and a 72% jump in adjusted earnings from operations in the U.S. division.

Contributing editor Tom Slee recommended Manulife as a turnaround situation in September at C$13.48, US$12.99. The stock closed Friday at C$14.79, US$14.76. Tom will provide a more detailed update in an upcoming issue.

About the author:

Gordon Pape
GuruFocus - Stock Picks and Market Insight of Gurus

Rating: 3.8/5 (5 votes)

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