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Southern Copper (SCCO) Q4 Earnings Lag Estimates, Sales Beat

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Southern Copper Corporation SCCO reported fourth-quarter 2019 adjusted earnings of 40 cents per share, which missed the Zacks Consensus Estimate of 48 cents.  However, the figure improved 4% from prior-year quarter figure of 38 cents.
 
Net sales came in at $1,855 million, up 9% year over year. The top line improved on higher sales volume of copper, silver and molybdenum, and rising silver prices. However, lower copper, molybdenum and zinc prices somewhat offset these gains. Further, the reported sales figure surpassed the Zacks Consensus Estimate of $1,832 million.

Adjusted EBITDA dipped 1% year over year to $787 million in fourth-quarter 2019. Adjusted EBITDA margin was 42% compared with the prior-year quarter figure of 47%.

Southern Copper Corporation Price, Consensus and EPS Surprise

 

Copper: Southern Copper mined 256,461 tons of copper during the reported quarter, up 9% year over year.

Molybdenum: The company mined 7,881 tons of molybdenum during the reported quarter, indicating year-over-year growth of 39%.
 
Zinc: The company’s zinc production improved 16% year over year to 20,364 tons in fourth-quarter 2019.
 
Silver:
Southern Copper’s silver production surged 31.7% year over year to 5,663,000 ounces.

Financials
 
The company generated net cash from operating activities of $1,912 million in 2019 compared with $2235 million reported in the prior year.
 
Cash and cash equivalents were at $1,925 million at the end of 2019, up from $845 million recorded at the end of the prior year. Long-term debt increased to $6,541 million at the 2019 end from $5,960 million at the end of the prior end.

The company made capital investments worth $707 million during 2019. These are in sync with Southern Copper’s growth program, which aims to reach annual production of 1.5 million tons of copper by 2028.

Production Update

In 2019, copper production reached over 1 million tons, which is a new milestone in the company’s history. It also marks year-over-year increase of 12.5% primarily due to higher copper production at the Toquepala mine from the successful ramping up of the new concentrator at this facility; and the Buenavista mine as result of operating improvements at its SX-EW plants. However, lower production at the Cuajone mine due to lower ore grades was a minor concern.

2019 Results

Southern Copper reported adjusted earnings per share of $1.92 in 2019, down 4% from the prior year. Earnings missed the Zacks Consensus Estimate of $2.02. Sales were a record $7,286 million in 2019, up 3% from the previous year. The top line also missed the Zacks Consensus Estimate of $7,290 million.

Price Performance

Shares of Southern Copper have fallen 4.6% over the past year compared with the industry’s decline of 4.4%.

Zacks Rank & Stocks to Consider

Southern Copper currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the basic materials space are Daqo New Energy Corp DQ, Franco-Nevada Corporation (FNV - Free Report) and Impala Platinum Holdings Limited IMPUY, each currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Daqo New Energy has an expected long-term earnings growth rate of 29%. The company’s shares have soared 96% in the past year.

Franco-Nevada has a projected long-term earnings growth rate of 4%. Its shares have surged 57% over the past year.

Impala Platinum has an estimated long-term earnings growth rate of 26.5%. The company’s shares have appreciated 142% in a year’s time.

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