Southern Copper (SCCO) Up 7.8% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for Southern Copper (SCCO). Shares have added about 7.8% in that time frame, outperforming 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 catalysts.

Southern Copper Q1 Earnings Lag Estimates, Sales Beat

Southern Copper Corporation reported first-quarter 2020 adjusted earnings of 28 cents per share, which missed the Zacks Consensus Estimate of 39 cents.  The figure also declined 44% from prior-year quarter figure of 39 cents primarily owing to lower sales and higher operating costs.

Net sales came in at $1,720 million, down 2% year over year. However, the top line surpassed the Zacks Consensus Estimate of $1,637 million. While the company witnessed higher volumes of copper, silver and molybdenum and zinc, lower metal prices led to lower sales in the quarter.

Total operating costs flared up 12% year over year to $1,186 million. Operating profit plunged 23% to $533 million on lower sales and higher operating costs. Adjusted EBITDA declined 19% year over year to $719 million in first-quarter 2020. Adjusted EBITDA margin was 42% compared with the prior-year quarter figure of 51%.

Operating Highlights

Copper: Southern Copper mined 241,967 tons of copper during the reported quarter, up 6% year over year.

Molybdenum: The company mined 7,185 tons of molybdenum during the reported quarter, indicating year-over-year growth of 40%.

Zinc: The company’s zinc production improved 4% year over year to 19,263 tons in the quarter under review.

Silver: Southern Copper’s silver production surged 22% year over year to 5,278,000 ounces.

Financials

The company generated net cash from operating activities of $475 million in first-quarter 2020 compared with $371 million in the prior-year quarter.

Cash and cash equivalents were at $2,051.6 million at the end of first-quarter 2020, up from $737 million recorded at the end of the prior year and $1,925 million as of fiscal 2019 end. Long-term debt was $6,542 million at the quarter end compared with $6,541 million as of 2019 end and $5,960 million as of the prior-year quarter end. The company made capital investments worth $101 million during the reported quarter.

On Apr 23, 2020, Southern Copper’s board of directors authorized a dividend of 20 cents per share payable on May 26, 2020, to shareholders of record at the close of business on May 13, 2020. Due to the uncertainty of the metal markets and world economy, and its planned expansions, the board has slashed the dividend to 50% of its former payout.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted -7.14% due to these changes.

VGM Scores

Currently, Southern Copper has a subpar Growth Score of D, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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

Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. Notably, Southern Copper has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Southern Copper Corporation (SCCO) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.