Freeport-McMoRan Inc. (NYSE:FCX)

The period under review demonstrates a consistent pattern of negative economic profit. Net operating profit after taxes (NOPAT) experienced a decline from 2021 to 2023, followed by modest increases in 2024 and 2025, but remained below the 2021 level. The cost of capital remained relatively stable between 2021 and 2025, with a slight increase observed in the final year. Invested capital fluctuated, increasing in 2022, decreasing in 2023 and 2024, and then experiencing a substantial rise in 2025. These movements collectively contributed to the observed trend in economic profit.

NOPAT Trend

Net operating profit after taxes decreased from US$6,188 million in 2021 to US$4,632 million in 2023, representing a reduction of approximately 25%. A slight recovery occurred in 2024, reaching US$4,538 million, and further improvement was seen in 2025 with US$4,755 million, though these levels did not surpass the initial 2021 figure.

Cost of Capital

The cost of capital exhibited relative stability throughout the period, ranging between 20.46% and 20.56% from 2021 to 2024. A noticeable increase to 21.33% was observed in 2025, potentially impacting economic profit calculations.

Invested Capital

Invested capital increased from US$35,043 million in 2021 to US$36,035 million in 2022. Subsequently, it decreased to US$35,126 million in 2023 and further to US$33,889 million in 2024. A significant increase was then recorded in 2025, reaching US$40,693 million. This fluctuation in invested capital likely influenced the economic profit figures.

Economic Profit

Economic profit remained negative throughout the entire period. The deficit widened from US$-988 million in 2021 to US$-2,557 million in 2023. While the negative profit lessened slightly in 2024 to US$-2,431 million, it deteriorated again in 2025, reaching US$-3,922 million. The increasing magnitude of the negative economic profit in 2025 suggests a growing disparity between returns generated and the cost of capital employed.

The consistent negative economic profit indicates that the company’s returns are not covering its cost of capital. The increase in economic loss in 2025, despite a rise in NOPAT, is attributable to the combined effect of a higher cost of capital and a substantial increase in invested capital. Continued monitoring of these trends is recommended to assess the company’s ability to generate returns exceeding its cost of capital.

Net income attributable to common stockholders and net operating profit after taxes (NOPAT) exhibited distinct performance patterns between 2021 and 2025. NOPAT demonstrated relative stability compared to net income, while both metrics experienced fluctuations over the five-year period.

NOPAT Trend

NOPAT began at US$6,188 million in 2021, representing the highest value within the observed timeframe. A decline was noted in 2022, falling to US$5,116 million. This downward trend continued, albeit at a slower pace, reaching US$4,632 million in 2023. A slight decrease was observed in 2024, with NOPAT at US$4,538 million. Finally, NOPAT increased to US$4,755 million in 2025, indicating a potential stabilization or modest recovery.

Net Income Trend

Net income attributable to common stockholders started at US$4,306 million in 2021. A substantial decrease occurred in 2022, with net income reported at US$3,468 million. This decline was more pronounced in 2023, reaching US$1,848 million. A slight recovery was seen in 2024, with net income at US$1,889 million, followed by a further increase to US$2,204 million in 2025.

Relationship between NOPAT and Net Income

While both metrics moved in similar directions, the magnitude of change differed. The decrease in net income from 2021 to 2023 was more significant than the corresponding decrease in NOPAT. This suggests that factors beyond core operating profitability, such as financing costs or non-operating items, played a substantial role in influencing net income. The relative stabilization of NOPAT in the later years, coupled with the recovery in net income, indicates a potential improvement in the efficiency of translating operating profits into earnings attributable to common stockholders.

Overall, the period demonstrates a challenging environment initially, followed by signs of potential stabilization and recovery in the later years, particularly as evidenced by the 2025 figures for both NOPAT and net income.

The provision for income taxes and cash operating taxes exhibited fluctuations over the five-year period. While both metrics generally remained within a relatively narrow range, notable shifts occurred in specific years, particularly in 2024.

Provision for Income Taxes

The provision for income taxes remained relatively stable between 2021 and 2023, fluctuating around the $2,200 million to $2,300 million mark. A discernible increase was observed in 2024, reaching $2,523 million, before decreasing to $2,221 million in 2025. This suggests potential impacts from changes in tax regulations or profitability in 2024, followed by a partial reversion in the subsequent year.

Cash Operating Taxes

Cash operating taxes demonstrated a decreasing trend from 2021 to 2023, declining from $2,217 million to $2,009 million. Similar to the provision for income taxes, a substantial increase occurred in 2024, with cash operating taxes rising to $2,672 million. This was followed by a decrease to $2,057 million in 2025, mirroring the pattern observed in the provision for income taxes. The correlation between the two metrics suggests that changes in reported income taxes are largely reflected in actual cash outflows for taxes.

Relationship between Provision and Cash Taxes

The difference between the provision for income taxes and cash operating taxes remained relatively consistent across the period, generally ranging between $80 million and $200 million. This difference likely represents deferred tax items, such as changes in tax loss carryforwards or temporary differences between book and tax accounting methods. The consistency in this difference indicates a stable tax position regarding these deferred items.

2024 Anomaly

The year 2024 stands out due to the significant increases in both the provision for income taxes and cash operating taxes. Further investigation would be required to determine the underlying drivers of this increase, such as a substantial rise in pre-tax income, changes in applicable tax rates, or the recognition of previously unrealized tax liabilities. The subsequent decrease in 2025 suggests the factors driving the 2024 increase were not sustained.

The reported invested capital exhibited a generally stable pattern over the five-year period, with fluctuations observed. Total reported debt & leases and stockholders’ equity both contributed to the overall invested capital figure, and their individual trends influenced the invested capital’s trajectory.

Invested Capital Trend

Invested capital increased from US$35.043 billion in 2021 to US$36.035 billion in 2022, representing a growth of approximately 2.8%. A slight decrease followed in 2023, with invested capital reaching US$35.126 billion. This was further reduced in 2024 to US$33.889 billion, marking the lowest value within the observed period. However, a significant increase occurred in 2025, with invested capital rising to US$40.693 billion.

Debt & Leases

Total reported debt & leases increased from US$9.769 billion in 2021 to US$10.952 billion in 2022, a rise of approximately 12.1%. It then decreased in both 2023 and 2024, reaching US$9.853 billion and US$9.738 billion respectively. A subsequent increase was noted in 2025, with debt & leases reaching US$10.492 billion. The fluctuations in debt levels likely influenced the invested capital calculations.

Stockholders’ Equity

Stockholders’ equity demonstrated a consistent upward trend throughout the period. It increased from US$13.980 billion in 2021 to US$15.555 billion in 2022, US$16.693 billion in 2023, US$17.581 billion in 2024, and finally to US$18.899 billion in 2025. This continuous growth in equity contributed positively to the overall invested capital, particularly offsetting the decline observed in 2024.

The substantial increase in invested capital in 2025 is primarily attributable to the combined effect of a moderate increase in debt & leases and a more significant increase in stockholders’ equity. The decrease in invested capital in 2024 appears to be driven by a reduction in both debt and equity, although the decrease in debt was less pronounced.

The economic spread ratio demonstrates a consistently negative trend over the five-year period. Economic profit consistently registers as negative, indicating the company’s returns are less than its cost of capital. Invested capital fluctuates, but does not offset the increasing negative economic profit.

Economic Spread Ratio

The economic spread ratio declined from -2.82% in 2021 to -9.64% in 2025. This indicates a widening gap between the company’s rate of return on invested capital and its weighted average cost of capital. The ratio’s movement suggests a deterioration in value creation as the difference between returns and capital costs grows increasingly negative.

Economic profit exhibits a worsening trend, moving from negative US$988 million in 2021 to negative US$3,922 million in 2025. This suggests the company is destroying economic value each year, and the rate of value destruction is accelerating. While 2023 saw a slight increase in the magnitude of the loss compared to 2022, the trend remains consistently negative.

Invested Capital

Invested capital increased from US$35,043 million in 2021 to US$36,035 million in 2022, then decreased to US$33,889 million in 2024 before rising to US$40,693 million in 2025. The fluctuations in invested capital do not appear to correlate directly with the worsening economic spread ratio or economic profit, suggesting the primary driver of the negative trend is a decline in returns relative to the cost of capital, rather than changes in the capital base itself.

The combined trends indicate a growing concern regarding the company’s ability to generate returns exceeding its cost of capital. The increasing negative economic spread ratio and economic profit suggest a need for strategic review to improve profitability or optimize capital allocation.

The economic profit margin demonstrates a consistently negative trend over the five-year period. Economic profit itself is negative throughout the observed timeframe, indicating the company’s returns are insufficient to cover its cost of capital.

Economic Profit Margin Trend

The economic profit margin declined from -4.30% in 2021 to -15.13% in 2025. This represents a substantial deterioration in the company’s ability to generate profit exceeding its capital costs. The most significant single-year decrease occurred between 2024 and 2025, with a change of -5.55 percentage points.

While adjusted revenues experienced fluctuations, increasing from US$22,665 million in 2022 to US$25,930 million in 2025, this revenue growth was not sufficient to offset the increasing negative economic profit. The widening gap between negative economic profit and relatively stable, then increasing, revenues suggests a potential issue with cost management or capital allocation efficiency.

Relationship between Revenue and Economic Profit Margin

Despite an overall increase in adjusted revenues of approximately 13.4% between 2022 and 2025, the economic profit margin worsened considerably. This indicates that the increase in revenue did not translate into improved profitability relative to the company’s cost of capital. The negative correlation suggests that factors beyond revenue generation are significantly impacting the company’s economic performance.

The consistent negative economic profit margin across all observed years warrants further investigation into the underlying drivers of cost of capital and operational efficiency. The accelerating decline in the margin, particularly in the most recent year, signals a potentially worsening situation that requires attention.