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Why Is Southern Copper (SCCO) Up 6.5% Since Last Earnings Report?
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A month has gone by since the last earnings report for Southern Copper (SCCO - Free Report) . Shares have added about 6.5% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Southern Copper due for a pullback? 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 reported third-quarter 2023 earnings of 80 cents per share, which beat the Zacks Consensus Estimate of earnings of 77 cents per share. The bottom line improved 19% from the prior-year quarter, primarily driven by higher prices of molybdenum, silver and copper and higher molybdenum sales volumes.
Net sales were $2,506 million, which marked a 16% improvement year over year. The top line surpassed the consensus estimate of $2,418 million.
Revenues were primarily driven by higher prices for molybdenum (47.4%) silver (23.6%) and copper (8%). The company witnessed a 12.5% year-over-year increase in molybdenum sales volumes. This gain was offset by lower sales volumes of copper, silver and zinc, which declined 4.5%, 7.2% and 10.8% respectively.
Operating cash cost per pound of copper (net of by-product revenue credits) was 98 cents in the quarter under review, down 5% from the year-ago quarter.
Cost of sales increased 3.3% year over year to $1,176 million in the third quarter of 2023. Total operating costs moved up 5% year over year to $1,436 million.
Operating profit in the third quarter was $1,069 million, reflecting a 36% year-over-year improvement. The operating margin in the reported quarter was 42.7% compared with 36.5% in the prior-year quarter.
Adjusted EBITDA increased 27% year over year to $1,291 million in third-quarter 2023. Adjusted EBITDA margin was 51.5% compared with the year-ago quarter margin of 47.2%.
Production Details
Copper: SCCO mined 226,120 tons of copper in the reported quarter, down 2% year over year. The company reported lower production at the Peruvian mines, mainly due to lower grades at Cuajone. This was somewhat offset by improved production at the Toquepala mine due to better ore grades. Production at Mexican operations decreased 1.8% due to lower production at the Buenavista mine. Copper sales declined 4.5% year over year to 224,706 tons.
Molybdenum: The company mined 6,859 tons of molybdenum in the reported quarter, reflecting a year-over-year improvement of 12.6% driven by higher output at the Toquepala, Buenavista and La Caridad mines. Molybdenum sales were 6,935 tons in the quarter under review compared with 6,164 tons in the third quarter of 2022.
Zinc: The company’s zinc production rose 9.4% year over year to 16,281 tons in the quarter under review. Higher production at the Charcas and Santa Barbara units was mainly attributable to an increase in processed material. These results were partially offset by lower production at the San Martin mine due to lower ore milled. Zinc sales decreased 11% year over year to 24,883 tons in the third quarter of 2023.
Silver: Southern Copper’s silver production declined 10% year over year to 4,390,000 ounces due to lower production at all operations, barring Toquepala. Sales were down 7% year over year to 4,421,000 ounces.
Cash Flow & Balance Sheet
Southern Copper generated net cash from operating activities of $3 billion in the nine-month period ended Sep 30, 2023, up from $1.7 billion in the prior-year comparable period, attributable to higher metal prices and cost-control efficiencies. Cash and cash equivalents were $1.97 billion at the end of the third quarter of 2023 compared with $2.2 billion as of the end of the third quarter of 2022.
Long-term debt was $6.25 billion as of Sep 30, 2023, flat compared with the debt balance as of Jun 30, 2022. SCCO made capital investments worth $753 million in the nine-month period ended Sep 30, 2023, 14.5% higher than the spending in the prior-year comparable period.
How Have Estimates Been Moving Since Then?
Estimates review followed a flat path over the past two months.
VGM Scores
At this time, Southern Copper has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Southern Copper has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
Performance of an Industry Player
Southern Copper belongs to the Zacks Mining - Non Ferrous industry. Another stock from the same industry, Freeport-McMoRan (FCX - Free Report) , has gained 9.4% over the past month. More than a month has passed since the company reported results for the quarter ended September 2023.
Freeport-McMoRan reported revenues of $5.82 billion in the last reported quarter, representing a year-over-year change of +16.4%. EPS of $0.39 for the same period compares with $0.26 a year ago.
Freeport-McMoRan is expected to post earnings of $0.30 per share for the current quarter, representing a year-over-year change of -42.3%. Over the last 30 days, the Zacks Consensus Estimate has changed -16.6%.
Freeport-McMoRan has a Zacks Rank #5 (Strong Sell) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.
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Why Is Southern Copper (SCCO) Up 6.5% Since Last Earnings Report?
A month has gone by since the last earnings report for Southern Copper (SCCO - Free Report) . Shares have added about 6.5% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Southern Copper due for a pullback? 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 Q3 Earnings Beat Estimates, Rise Y/Y
Southern Copper reported third-quarter 2023 earnings of 80 cents per share, which beat the Zacks Consensus Estimate of earnings of 77 cents per share. The bottom line improved 19% from the prior-year quarter, primarily driven by higher prices of molybdenum, silver and copper and higher molybdenum sales volumes.
Net sales were $2,506 million, which marked a 16% improvement year over year. The top line surpassed the consensus estimate of $2,418 million.
Revenues were primarily driven by higher prices for molybdenum (47.4%) silver (23.6%) and copper (8%). The company witnessed a 12.5% year-over-year increase in molybdenum sales volumes. This gain was offset by lower sales volumes of copper, silver and zinc, which declined 4.5%, 7.2% and 10.8% respectively.
Operating cash cost per pound of copper (net of by-product revenue credits) was 98 cents in the quarter under review, down 5% from the year-ago quarter.
Cost of sales increased 3.3% year over year to $1,176 million in the third quarter of 2023. Total operating costs moved up 5% year over year to $1,436 million.
Operating profit in the third quarter was $1,069 million, reflecting a 36% year-over-year improvement. The operating margin in the reported quarter was 42.7% compared with 36.5% in the prior-year quarter.
Adjusted EBITDA increased 27% year over year to $1,291 million in third-quarter 2023. Adjusted EBITDA margin was 51.5% compared with the year-ago quarter margin of 47.2%.
Production Details
Copper: SCCO mined 226,120 tons of copper in the reported quarter, down 2% year over year. The company reported lower production at the Peruvian mines, mainly due to lower grades at Cuajone. This was somewhat offset by improved production at the Toquepala mine due to better ore grades. Production at Mexican operations decreased 1.8% due to lower production at the Buenavista mine. Copper sales declined 4.5% year over year to 224,706 tons.
Molybdenum: The company mined 6,859 tons of molybdenum in the reported quarter, reflecting a year-over-year improvement of 12.6% driven by higher output at the Toquepala, Buenavista and La Caridad mines. Molybdenum sales were 6,935 tons in the quarter under review compared with 6,164 tons in the third quarter of 2022.
Zinc: The company’s zinc production rose 9.4% year over year to 16,281 tons in the quarter under review. Higher production at the Charcas and Santa Barbara units was mainly attributable to an increase in processed material. These results were partially offset by lower production at the San Martin mine due to lower ore milled. Zinc sales decreased 11% year over year to 24,883 tons in the third quarter of 2023.
Silver: Southern Copper’s silver production declined 10% year over year to 4,390,000 ounces due to lower production at all operations, barring Toquepala. Sales were down 7% year over year to 4,421,000 ounces.
Cash Flow & Balance Sheet
Southern Copper generated net cash from operating activities of $3 billion in the nine-month period ended Sep 30, 2023, up from $1.7 billion in the prior-year comparable period, attributable to higher metal prices and cost-control efficiencies. Cash and cash equivalents were $1.97 billion at the end of the third quarter of 2023 compared with $2.2 billion as of the end of the third quarter of 2022.
Long-term debt was $6.25 billion as of Sep 30, 2023, flat compared with the debt balance as of Jun 30, 2022. SCCO made capital investments worth $753 million in the nine-month period ended Sep 30, 2023, 14.5% higher than the spending in the prior-year comparable period.
How Have Estimates Been Moving Since Then?
Estimates review followed a flat path over the past two months.
VGM Scores
At this time, Southern Copper has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Southern Copper has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
Performance of an Industry Player
Southern Copper belongs to the Zacks Mining - Non Ferrous industry. Another stock from the same industry, Freeport-McMoRan (FCX - Free Report) , has gained 9.4% over the past month. More than a month has passed since the company reported results for the quarter ended September 2023.
Freeport-McMoRan reported revenues of $5.82 billion in the last reported quarter, representing a year-over-year change of +16.4%. EPS of $0.39 for the same period compares with $0.26 a year ago.
Freeport-McMoRan is expected to post earnings of $0.30 per share for the current quarter, representing a year-over-year change of -42.3%. Over the last 30 days, the Zacks Consensus Estimate has changed -16.6%.
Freeport-McMoRan has a Zacks Rank #5 (Strong Sell) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.