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Southern Copper (SCCO) Down 3.9% Since Last Earnings Report: Can It Rebound?
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It has been about a month since the last earnings report for Southern Copper (SCCO - Free Report) . Shares have lost about 3.9% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Southern Copper due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Southern Copper Q1 Earnings Top Estimates on High Prices
Southern Copper reported first-quarter 2021 earnings of 99 cents per share, which beat the Zacks Consensus Estimate of 89 cents. The whopping 254% year-over-year improvement was primarily driven by higher prices for copper, silver and zinc and stable operating costs.
Net sales were $2,352 million, up 47% year over year. Revenues were mainly driven by higher metal prices for copper (50.4%), silver (55.8%) and zinc (28.9%), which were slightly offset by lower sales volumes for copper and zinc.
Total operating costs inched down 0.5% year over year to $1,181 million. Operating profit soared 153% to $1,352 million on higher sales. Operating margin in the reported quarter was 53.4% compared with 31.0% in the prior-year quarter. Adjusted EBITDA increased 116% year over year to $1,554 million in first-quarter 2021. Adjusted EBITDA margin was 61.4% compared with the year-ago quarter figure of 41.8%.
Operating Highlights
Copper: Southern Copper mined 238,402 tons of copper during the reported quarter, down 1.5% year over year. Production increased in the IMMSA operations owing to higher production at the San Martin mine. However, lower production at Peruvian mines and La Caridad mine due to lower ore grades negated the improvement.
Molybdenum: The company mined 7,200 tons of molybdenum during the first quarter, reflecting slight year-over-year growth of 0.2%. Higher production at Peruvian mines were partially offset by a decrease in production at Buenavista.
Zinc: The company’s zinc production declined 14.5% year over year to 16,466 tons in the quarter under review. This was due to lower production at the Charcas, Santa Barbara and San Martin mines. Silver: Southern Copper’s silver production decreased 6.3% year over year to 9,946,000 ounces due to lower production at Buenavista and IMMSA.
Financials
Southern Copper generated net cash from operating activities of $782 million in the first quarter of 2021 compared with $475 million in the prior-year quarter. Cash and cash equivalents were at $2,267 million at the end of the first quarter, up from $2,183 million as of 2020 end. Long-term debt was $6,545 million at the quarter end compared with $6,544 million as of 2020 end. The company made capital investments worth $232 million during the quarter under review.
The outlook for copper remains strong this year. The ongoing recovery in automobile industry and the $2 trillion infrastructure package announced by President Biden will significantly increase the demand for copper. Demand in China continues to remain strong. Given the low level of inventories, a deficit is expected this year for copper, which will further support its prices. This bodes well for Southern Copper.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted 11% due to these changes.
VGM Scores
At this time, Southern Copper has a strong Growth Score of A, a grade with the same score on the momentum front. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Southern Copper has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
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Southern Copper (SCCO) Down 3.9% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for Southern Copper (SCCO - Free Report) . Shares have lost about 3.9% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Southern Copper due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Southern Copper Q1 Earnings Top Estimates on High Prices
Southern Copper reported first-quarter 2021 earnings of 99 cents per share, which beat the Zacks Consensus Estimate of 89 cents. The whopping 254% year-over-year improvement was primarily driven by higher prices for copper, silver and zinc and stable operating costs.
Net sales were $2,352 million, up 47% year over year. Revenues were mainly driven by higher metal prices for copper (50.4%), silver (55.8%) and zinc (28.9%), which were slightly offset by lower sales volumes for copper and zinc.
Total operating costs inched down 0.5% year over year to $1,181 million. Operating profit soared 153% to $1,352 million on higher sales. Operating margin in the reported quarter was 53.4% compared with 31.0% in the prior-year quarter. Adjusted EBITDA increased 116% year over year to $1,554 million in first-quarter 2021. Adjusted EBITDA margin was 61.4% compared with the year-ago quarter figure of 41.8%.
Operating Highlights
Copper: Southern Copper mined 238,402 tons of copper during the reported quarter, down 1.5% year over year. Production increased in the IMMSA operations owing to higher production at the San Martin mine. However, lower production at Peruvian mines and La Caridad mine due to lower ore grades negated the improvement.
Molybdenum: The company mined 7,200 tons of molybdenum during the first quarter, reflecting slight year-over-year growth of 0.2%. Higher production at Peruvian mines were partially offset by a decrease in production at Buenavista.
Zinc: The company’s zinc production declined 14.5% year over year to 16,466 tons in the quarter under review. This was due to lower production at the Charcas, Santa Barbara and San Martin mines.
Silver: Southern Copper’s silver production decreased 6.3% year over year to 9,946,000 ounces due to lower production at Buenavista and IMMSA.
Financials
Southern Copper generated net cash from operating activities of $782 million in the first quarter of 2021 compared with $475 million in the prior-year quarter. Cash and cash equivalents were at $2,267 million at the end of the first quarter, up from $2,183 million as of 2020 end. Long-term debt was $6,545 million at the quarter end compared with $6,544 million as of 2020 end. The company made capital investments worth $232 million during the quarter under review.
The outlook for copper remains strong this year. The ongoing recovery in automobile industry and the $2 trillion infrastructure package announced by President Biden will significantly increase the demand for copper. Demand in China continues to remain strong. Given the low level of inventories, a deficit is expected this year for copper, which will further support its prices. This bodes well for Southern Copper.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted 11% due to these changes.
VGM Scores
At this time, Southern Copper has a strong Growth Score of A, a grade with the same score on the momentum front. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Southern Copper has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.