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 exhibited relative stability between 2021 and 2023, with a slight increase in 2024 and a more pronounced rise in 2025. Invested capital fluctuated, increasing in 2022, decreasing in 2023 and 2024, and then significantly increasing in 2025. These movements collectively contributed to the observed trend in economic profit.

NOPAT Trend

NOPAT decreased from US$6,188 million in 2021 to US$4,632 million in 2023, representing a reduction of approximately 25%. A subsequent recovery occurred, with NOPAT reaching US$4,538 million in 2024 and US$4,755 million in 2025. However, these later figures did not fully offset the earlier decline.

Cost of Capital Trend

The cost of capital remained relatively stable between 2021 and 2024, fluctuating within a narrow range of 20.34% to 20.43%. A more substantial increase was observed in 2025, rising to 21.19%. This increase in the cost of capital likely exerted downward pressure on economic profit.

Invested Capital Trend

Invested capital increased from US$35,043 million in 2021 to US$36,035 million in 2022. It then decreased to US$35,126 million in 2023 and further to US$33,889 million in 2024. A significant increase was recorded in 2025, with invested capital reaching US$40,693 million. The fluctuations in invested capital, combined with the NOPAT and cost of capital trends, influenced the overall economic profit.

Economic Profit Trend

Economic profit was negative throughout the entire period. The deficit widened from US$-944 million in 2021 to US$-2,512 million in 2023. While the negative profit lessened slightly in 2024 to US$-2,388 million, it deteriorated further in 2025, reaching US$-3,868 million. This indicates that the returns generated by the invested capital were consistently below the cost of that capital.

The increasing economic loss in 2025 is particularly noteworthy, driven by the combination of a rising cost of capital and a substantial increase in invested capital, despite a modest increase in NOPAT. This suggests a potential need to evaluate capital allocation strategies and operational efficiency.

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 negativity of economic profit.

Economic Spread Ratio

The economic spread ratio declined from -2.69% in 2021 to -9.51% in 2025. This represents a substantial deterioration in the difference between the company’s return on invested capital and its weighted average cost of capital. The ratio’s movement suggests a widening gap between the cost of funding operations and the returns generated from those operations.

Economic profit exhibits a worsening pattern. Starting at -944 US$ million in 2021, it decreases to -3,868 US$ million by 2025. This indicates a growing shortfall in returns relative to the capital employed. While 2023 shows a slight increase in the absolute value of the loss compared to 2022, the trend resumes its downward trajectory in 2024 and accelerates in 2025.

Invested Capital

Invested capital increased from 35,043 US$ million in 2021 to 36,035 US$ million in 2022, then decreased to 33,889 US$ million in 2024 before rising significantly to 40,693 US$ million in 2025. The increase in invested capital in the later period does not correlate with an improvement in economic profit; rather, it coincides with a further decline in the economic spread ratio, suggesting that additional capital deployment is not generating sufficient returns.

The combined trends suggest that the company is increasingly struggling to generate returns that cover its cost of capital. The widening negative economic spread ratio and the growing economic profit deficit are concerning indicators of value destruction.

The economic profit margin demonstrates a consistently negative trend over the five-year period. While adjusted revenues exhibit some fluctuation, the economic profit remains negative throughout, resulting in declining economic profit margins.

Economic Profit

Economic profit decreased from a loss of US$944 million in 2021 to a loss of US$3,868 million in 2025. The largest year-over-year decrease occurred between 2022 and 2023, with a decline of US$288 million. A smaller decrease was observed between 2023 and 2024, followed by a more substantial decrease in 2025.

Adjusted Revenues

Adjusted revenues experienced a slight decrease from US$22,971 million in 2021 to US$22,665 million in 2022. Revenues then increased to US$22,940 million in 2023, continued to US$25,385 million in 2024, and further increased to US$25,930 million in 2025. Despite these revenue increases in the later years, they were insufficient to offset the increasing economic losses.

Economic Profit Margin

The economic profit margin deteriorated from -4.11% in 2021 to -14.92% in 2025. The most significant decline in margin occurred between 2021 and 2022, decreasing by 5.70 percentage points. The margin continued to worsen in subsequent years, although the rate of decline slowed between 2024 and 2025. The consistently negative and worsening margin indicates that the company is not generating returns exceeding its cost of capital.

The increasing negative economic profit margin, despite revenue growth in the later periods, suggests that the cost of capital is increasing at a faster rate than profitability, or that operational inefficiencies are eroding profits. Further investigation into the components of economic profit – revenues, costs, and capital employed – is warranted to understand the drivers of this trend.