Schaeffer's Trading Floor Blog

Analyst Downgrades: Freeport-McMoRan, Metlife, and AutoZone

Analysts downwardly revised their ratings on FCX, MET, and AZO

by 12/6/2012 9:19 AM
Stocks quoted in this article:

Analysts are weighing in today on mining issue Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX - 32.16), insurance firm Metlife Inc (NYSE:MET - 33.32), and auto parts retailer AutoZone, Inc. (NYSE:AZO - 360.27). Here's a quick roundup of today's bearish brokerage notes.

  • FCX was flooded with bearish attention this morning, after the company announced plans yesterday to buy Plains Exploration & Production Company (NYSE:PXP) and McMoRan Exploration Co (NYSE:MMR) in two separate deals totaling $9 billion in cash and stock. The equity was lowered to "neutral" from "outperform" at Macquarie, while UBS, Goldman Sachs, Citigroup, Deutsche Bank, BMO, RBC, and Nomura also issued downgrades and/or price-target cuts. FCX has surrendered more than 20% from the year-ago period, yet traders have bought to open more than three calls for every put during the past month, as evidenced by the security's 20-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 3.56.

  • MET was downgraded to "equal weight" from "overweight," and received a price-target cut to $37 from $42 at Barclays today, which could chip away at the stock's year-to-date advance of about 7%. In the options pits, traders seem to prefer calls over their bearish counterparts. In fact, data pulled from the ISE/CBOE/PHLX shows a 50-day call/put volume ratio of 4.81, confirming calls bought to open have outnumbered puts by a margin of nearly five to one over the past few months. This ratio ranks higher than 80% of comparable readings taken within the past year, meaning speculators have purchased calls over puts at a faster pace just 20% of the time during the last 52 weeks.

  • Just two days after reporting weak same-store sales for the fiscal first quarter, AZO was cut to "perform" from "outperform," and saw its price target reduced to $400 from $461 at Oppenheimer ahead of the opening bell. The security has climbed nearly 11% so far this year, but that hasn't deterred near-term bears. Schaeffer's put/call open interest ratio (SOIR) for AZO checks in at 1.59, with puts easily outpacing calls among the front three-months' series of options. This pessimistically skewed ratio is docked in the 79th percentile of its annual range, reflecting a stronger-than-usual preference for puts over calls among short-term options players.

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