Stock of the Day

October 19, 2020

Southern Copper (SCCO)

$92.87
-$4.95 (-5.1%)
Market Cap: $76.84B

About Southern Copper

Southern Copper Corporation engages in mining, exploring, smelting, and refining copper and other minerals in Peru, Mexico, Argentina, Ecuador, and Chile. The company is involved in the mining, milling, and flotation of copper ore to produce copper and molybdenum concentrates; smelting of copper concentrates to produce blister and anode copper; refining of anode copper to produce copper cathodes; production of molybdenum concentrate and sulfuric acid; production of refined silver, gold, and other materials; and mining and processing of zinc, copper, molybdenum, silver, gold, and lead. It operates the Toquepala and Cuajone open-pit mines, and a smelter and refinery in Peru; and La Caridad, an open-pit copper mine, as well as a copper ore concentrator, a SX-EW plant, a smelter, refinery, and a rod plant in Mexico. The company also operates Buenavista, an open-pit copper mine, as well as two copper concentrators and two operating SX-EW plants in Mexico. In addition, it operates underground mines that produce zinc, lead, copper, silver, and gold; a coal mine; and a zinc refinery. The company has interests in 156,818 hectares and 502,688 hectares of concessions in Peru and Mexico; and 168,200 hectares and 28,453 hectares of exploration concessions in Argentina and Chile. Southern Copper Corporation was incorporated in 1952 and is based in Phoenix, Arizona. Southern Copper Corporation is a subsidiary of Americas Mining Corporation.

Southern Copper Bull Case

Here are some ways that investors could benefit from investing in Southern Copper Co.:

  • Strong Earnings Performance: Southern Copper Co. reported an earnings per share (EPS) of $1.15 for the latest quarter, surpassing analysts' expectations of $1.12. This indicates robust financial health and effective management, which can attract investors.
  • High Return on Equity: The company boasts a return on equity of 37.11%, reflecting its ability to generate profit from shareholders' equity. This high ratio is a positive indicator of financial efficiency and profitability.
  • Increasing Dividend: Southern Copper Co. recently raised its quarterly dividend to $0.70, up from $0.60. This increase signals confidence in future earnings and provides a steady income stream for investors, with an annualized yield of 2.87%.
  • Strong Institutional Support: Significant investments from large institutions, such as JPMorgan Chase & Co. increasing its stake by 74.6%, suggest confidence in the company's future performance and stability.
  • Current Stock Price: As of now, Southern Copper Co. has a market cap of $76.52 billion and a price-to-earnings ratio of 25.08, indicating a solid valuation in the market, which can be appealing for potential investors.

Southern Copper Bear Case

Investors should be bearish about investing in Southern Copper Co. for these reasons:

  • Revenue Miss: Despite the positive EPS, the company reported revenue of $2.93 billion, slightly below the analyst estimates of $2.94 billion. This miss could raise concerns about future growth potential.
  • High Debt-to-Equity Ratio: With a debt-to-equity ratio of 0.64, while not excessively high, it indicates that the company is using a significant amount of debt to finance its operations, which could pose risks in a rising interest rate environment.
  • Market Volatility: The stock has a beta of 1.13, suggesting it is more volatile than the market. This could lead to larger price swings, which may deter risk-averse investors.
  • Dependence on Commodity Prices: As a mining company, Southern Copper Co.'s performance is closely tied to copper prices. Any downturn in commodity prices could adversely affect profitability and stock performance.
  • Potential Regulatory Risks: Operating in multiple countries exposes Southern Copper Co. to various regulatory environments, which could lead to compliance costs and operational challenges.

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