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Southern Copper (SCCO) Q3 Earnings: What's in the Cards?
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Southern Copper Corp. (SCCO - Free Report) is expected to report third-quarter 2016 results on Oct 25.
Last quarter, the company reported a net income of $221.9 million or 29 cents a share, down 24.7% from a net income of $294.7 million or 37 cents a share in the year-ago quarter. However, earnings per share beat the Zacks Consensus Estimate of 27 cents.
Net sales for the second quarter fell 3.5% to $1,335.1 million from $1,382.9 million a year ago. The quarter’s cost of sales rose 6.3% to $751.6 million. The company was able to sell more in terms of volume last quarter compared to the year-ago period, but a 22% drop in average selling price lowered profits.
Let’s see how things have shaped up for the forthcoming announcement.
Factors at Play
Armed with a strong balance sheet, Southern Copper is mainly looking at expansion plans. The company has reduced its expected capital expenditure for 2016 from $1.58 billion to $1.4 billion, of which $564.9 million has been spent in the first half of the year. Given its aspiration to curb third-party copper purchase, the company is looking to expand its copper production by 90% from the 2013 level of 617,000 tons.
Southern Copper achieved a new record for first-half copper production in the first half of 2016. It produced 447,503 tons of copper, an increase of 26% from the first half of 2015, and expects to produce 913,500 tons for full-year 2016. A number of the company’s projects are ongoing and on schedule. Moreover, it is focused on cash management initiatives to reduce costs.
However, the company may face macroeconomic headwinds due to a weak copper industry. The prices of copper had been decreasing in first-half 2016, adversely affecting the company’s profits. Although prices have increased with higher demand in China and North America, production still remains high.
Overall, the company’s strong emphasis on lowering costs, increasing production and maintaining a healthy balance sheet may be beneficial in the long run. However, the macroeconomic conditions may have an adverse impact on its results in the short term.
Our proven model does not conclusively show that Southern Copper is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. As elaborated below, this is not the case with Southern Copper:
Zacks ESP: Earnings ESP for Southern Copper is -13.79%. This is because the Most Accurate estimate is 25 cents, while the Zacks Consensus Estimate stands at 29 cents.
Zacks Rank: Southern Copper’s Zacks Rank #3 increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings surprise.
Stocks that Warrant a Look
Here are some mining companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Vale S.A. (VALE - Free Report) has an Earnings ESP of +14.29% and a Zacks Rank #2.
Hi-Crush Partners LP has an Earnings ESP of +6.67% and a Zacks Rank #3.
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Southern Copper (SCCO) Q3 Earnings: What's in the Cards?
Southern Copper Corp. (SCCO - Free Report) is expected to report third-quarter 2016 results on Oct 25.
Last quarter, the company reported a net income of $221.9 million or 29 cents a share, down 24.7% from a net income of $294.7 million or 37 cents a share in the year-ago quarter. However, earnings per share beat the Zacks Consensus Estimate of 27 cents.
Net sales for the second quarter fell 3.5% to $1,335.1 million from $1,382.9 million a year ago. The quarter’s cost of sales rose 6.3% to $751.6 million. The company was able to sell more in terms of volume last quarter compared to the year-ago period, but a 22% drop in average selling price lowered profits.
Let’s see how things have shaped up for the forthcoming announcement.
Factors at Play
Armed with a strong balance sheet, Southern Copper is mainly looking at expansion plans. The company has reduced its expected capital expenditure for 2016 from $1.58 billion to $1.4 billion, of which $564.9 million has been spent in the first half of the year. Given its aspiration to curb third-party copper purchase, the company is looking to expand its copper production by 90% from the 2013 level of 617,000 tons.
Southern Copper achieved a new record for first-half copper production in the first half of 2016. It produced 447,503 tons of copper, an increase of 26% from the first half of 2015, and expects to produce 913,500 tons for full-year 2016. A number of the company’s projects are ongoing and on schedule. Moreover, it is focused on cash management initiatives to reduce costs.
However, the company may face macroeconomic headwinds due to a weak copper industry. The prices of copper had been decreasing in first-half 2016, adversely affecting the company’s profits. Although prices have increased with higher demand in China and North America, production still remains high.
Overall, the company’s strong emphasis on lowering costs, increasing production and maintaining a healthy balance sheet may be beneficial in the long run. However, the macroeconomic conditions may have an adverse impact on its results in the short term.
SOUTHERN COPPER Price and EPS Surprise
SOUTHERN COPPER Price and EPS Surprise | SOUTHERN COPPER Quote
Earnings Whispers
Our proven model does not conclusively show that Southern Copper is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. As elaborated below, this is not the case with Southern Copper:
Zacks ESP: Earnings ESP for Southern Copper is -13.79%. This is because the Most Accurate estimate is 25 cents, while the Zacks Consensus Estimate stands at 29 cents.
Zacks Rank: Southern Copper’s Zacks Rank #3 increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings surprise.
Stocks that Warrant a Look
Here are some mining companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Teck Resources Limited has an Earnings ESP of +4.55% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Vale S.A. (VALE - Free Report) has an Earnings ESP of +14.29% and a Zacks Rank #2.
Hi-Crush Partners LP has an Earnings ESP of +6.67% and a Zacks Rank #3.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>