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A Shinier Future for Phelps Dodge?

While Phelps Dodge's (PD) deal to buy fellow mining giant Inco Ltd. (N) has gone sour, at least one Wall Street firm has turned sweet on the company's stock.

Phoenix-based Phelps Dodge said Sept. 5 that it had canceled $17 billion takeover bid, and will receive $125 million in termination fees from Inco as a result. If a company tries to take over Inco anytime before Sept. 7, 2007, the Canadian miner will have to pay another $350 million to Phelps. The deal had been stymied by obstacles such as shareholder objections.

But at least one brokerage sees a silver lining. Citigroup on Sept. 6 hiked its rating on Phelps stock to buy from hold. Citigroup analyst John Hill noted other factors that are helping Phelps Dodge, ranging from the outlook for copper prices to the company's stand-out earnings.

"Phelps Dodge continues to generate some of the strongest margins and free cash flows in the industry, and we expect strong [second half 2006] results," analysts wrote in their research note.

Citigroup hiked its twelve month target on the stock price to $120 per share from $100. The stock was trading at $92.56 per share near the close of trading Wednesday.

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