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Southern Copper (SCCO) to Post Q4 Earnings: What's in Store?

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Southern Copper Corporation (SCCO - Free Report) is expected to deliver year-over-year improvement in both revenues and earnings when it reports fourth-quarter 2021 results next week. Upbeat prices for Southern Copper’s main metals might get reflected in its top-line performance. Meanwhile, the company’s concerted efforts to improve cost efficiency and productivity may have aided its earnings despite higher costs.

Q3 Results

In the last reported quarter, the company’s earnings and sales improved year over year. While earnings were in-line with the Zacks Consensus Estimate, revenues beat the same.

The company has surpassed earnings estimates in each of the trailing four quarters, the average surprise being 6.65%.

Q4 Estimates

The Zacks Consensus Estimate for fourth-quarter 2021 earnings per share is currently pegged at $1.15, indicating an improvement of 51% from the prior-year quarter. The estimate has moved down 3% over the past 30 days. The consensus mark for the quarter’s revenues stands at $2.61 billion, suggesting year-over-year growth of 10.8%.

What the Zacks Model Unveils

Our proven model predicts an earnings beat for Southern Copper this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat.

Earnings ESP: The Earnings ESP for Southern Copper is 0.29%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Southern Copper currently carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Key Factors to Note

Copper accounts for more than 80% of the company’s sales. Over the past few quarters, the company has been witnessing lower production at its Peruvian mines due to lower ore grades. This trend is expected to continue through 2022 and recover thereafter. Thus, the fourth-quarter production numbers are likely to reflect this impact. This may, however, be somewhat offset by higher production at its Mexican mines.

Overall, silver production is likely to be lower on account of lesser production at Buenavista, IMMSA and Toquepala. Production of molybdenum, its main by-product, has been high due to rising production at the Peruvian mines, namely the Toquepala mine, after throughput increased at the new Molybdenum plant spurred by improvements in ore grades and recoveries at other operations. The Buenavista mine might have contributed as well.

Copper prices have been trending up in the fourth quarter compared to the year-ago quarter, supported by improving demand from China amid supply worries. Zinc prices have also been improving steadily through the quarter on the back of strong demand and smelter disruption. Zinc prices even hit the highest level in 14 years in October. Molybdenum prices have been on an uptrend fueled by solid demand. However, average silver prices have been down on a year-over-year basis. Overall higher metal prices are likely to get reflected in the company’s fourth-quarter top line.

Operating cash costs might have been higher in the to-be-reported quarter due to lower grades. This may have weighed on margins. Nevertheless, higher metal prices and savings from the company’s stringent cost control measures are likely to have negated some impact.

Share Price Performance

Zacks Investment ResearchImage Source: Zacks Investment Research

The company’s shares have declined 2.4% over the past year compared with the industry’s rally of 18.6%.

Stocks to Consider

Here are some Basic Materials stocks which you may consider, as our model shows that these too have the right combination of elements to post an earnings beat in their upcoming releases.

CF Industries (CF - Free Report) has an Earnings ESP of +18.88% and a Zacks Rank #1. The Zacks Consensus Estimate for the company’s earnings for the fourth quarter of 2021 indicates year-over-year growth of 662.5%.

Shares of CF Industries have gained 54.7% over the past year. Over the last four quarters, CF’s earnings beat estimates in two of the trailing four quarters and missed twice, the average surprise being 97.8%.

MP Materials (MP - Free Report) has an Earnings ESP of +35.65% and a Zacks Rank #1. The Zacks Consensus Estimate for the company’s earnings for the fourth quarter of 2021 suggests a year-over-year growth of 5.56%.

Shares of MP Materials have gained 35.8% over the past year. MP’s earnings topped the consensus mark in each of the trailing four quarters, the average surprise being 45.5%.

Westlake Chemical (WLK - Free Report) has an Earnings ESP of +8.13% and a Zacks Rank #2.

Shares of Westlake Chemical have appreciated 24.6% over the past year. WLK’s earnings beat the consensus mark in each of the trailing four quarters, the average surprise being 17.8%.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.