BHP Billiton Limited (NYSE: BHP) and Freeport-McMoran (NYSE:FCX) are both large-cap basic materials companies, but which is the better business? We will compare the two businesses based on the strength of their valuation, risk, analyst recommendations, earnings, dividends, institutional ownership and profitability.

Profitability

This table compares BHP Billiton Limited and Freeport-McMoran’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
BHP Billiton Limited N/A N/A N/A
Freeport-McMoran 6.20% 13.35% 3.52%

Risk and Volatility

BHP Billiton Limited has a beta of 1.14, suggesting that its stock price is 14% more volatile than the S&P 500. Comparatively, Freeport-McMoran has a beta of 2.57, suggesting that its stock price is 157% more volatile than the S&P 500.

Institutional & Insider Ownership

3.0% of BHP Billiton Limited shares are held by institutional investors. Comparatively, 68.0% of Freeport-McMoran shares are held by institutional investors. 0.0% of BHP Billiton Limited shares are held by company insiders. Comparatively, 1.3% of Freeport-McMoran shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Valuation and Earnings

This table compares BHP Billiton Limited and Freeport-McMoran’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
BHP Billiton Limited $38.29 billion 1.77 $5.89 billion N/A N/A
Freeport-McMoran $14.83 billion 1.38 -$4.32 billion $0.74 19.12

BHP Billiton Limited has higher revenue and earnings than Freeport-McMoran.

Analyst Ratings

This is a summary of recent ratings for BHP Billiton Limited and Freeport-McMoran, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
BHP Billiton Limited 5 5 5 0 2.00
Freeport-McMoran 2 10 4 0 2.13

BHP Billiton Limited presently has a consensus target price of $34.61, indicating a potential downside of 17.89%. Freeport-McMoran has a consensus target price of $15.69, indicating a potential upside of 10.91%. Given Freeport-McMoran’s stronger consensus rating and higher probable upside, analysts clearly believe Freeport-McMoran is more favorable than BHP Billiton Limited.

Dividends

BHP Billiton Limited pays an annual dividend of $1.72 per share and has a dividend yield of 4.1%. Freeport-McMoran does not pay a dividend.

Summary

Freeport-McMoran beats BHP Billiton Limited on 8 of the 13 factors compared between the two stocks.

BHP Billiton Limited Company Profile

BHP Billiton Limited is a global resources company. The Company is a producer of various commodities, including iron ore, metallurgical coal, copper and uranium. Its segments include Petroleum, Copper, Iron Ore and Coal. The Petroleum segment is engaged in the exploration, development and production of oil and gas. The Copper segment is engaged in mining of copper, silver, lead, zinc, molybdenum, uranium and gold. The Iron Ore segment is engaged in mining of iron ore. The Coal segment is engaged in mining of metallurgical coal and thermal (energy) coal. Its businesses include Minerals Australia, Minerals Americas, Petroleum and Marketing. The Company extracts and processes minerals, oil and gas from its production operations located primarily in Australia and the Americas. The Company manages product distribution through its global logistics chain, including freight and pipeline transportation. Its businesses include Minerals Australia, Minerals Americas, Petroleum and Marketing.

Freeport-McMoran Company Profile

Freeport-McMoRan Inc. (FCX) is a mining company. The Company operates through geographical assets with proven and probable reserves of copper, gold and molybdenum, and traded copper producer. The Company’s segments include refined copper products, copper in concentrate, gold, molybdenum, oil and other. The Company’s segments include the Morenci, Cerro Verde, Grasberg copper mines, the Rod & Refining operations and the United States (U.S.) Oil and Gas Operations. The Company has organized its operations into five divisions, which include North America copper mines, South America mining, Indonesia mining and Molybdenum mines. The Company’s portfolio of assets includes the Grasberg minerals district in Indonesia, copper and gold deposits, and mining operations in the Americas, including the large-scale Morenci minerals district in North America and the Cerro Verde operation in South America.

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