It has been about a month since the last earnings report for Southern Copper (SCCO). Shares have added about 19.1% 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 Q4 Earnings Miss Estimates, Sales Beat
Southern Copper reported fourth-quarter 2021 earnings of $1.08 per share, which missed the Zacks Consensus Estimate of $1.12. The bottom line improved 42% from the prior-year quarter, primarily driven by higher sales on upbeat prices for its main metals and the company’s efforts to improve cost efficiency and productivity that helped offset the impact of higher costs.
Net sales were $2,823.7 million, up 20% year over year. The top line beat the Zacks Consensus Estimate of $2,605 million. Revenues were primarily driven by higher metal prices for copper (35.4%), molybdenum (107.5%) and zinc (28.6%). Gold and silver prices were down 4.2% and 4.7%, respectively. The company witnessed lower sales volume at its Peruvian operations due to bi-annual maintenance at the Ilo smelter.
Operating cash cost per pound of copper (net of by-product revenue credits) was 76 cents in the quarter under review, up 13% from the year-ago quarter. Total operating costs inched up 1% year over year to $1,293 million.
Operating profit surged 43.5% to $1,530.6 million on higher sales. Operating margin in the reported quarter was 54.2% compared with 45.4% in the prior-year quarter. Adjusted EBITDA improved 38% year over year to $1,726.5 million in fourth-quarter 2021. Adjusted EBITDA margin was 61.1% compared with the year-ago quarter figure of 53.4%.
Production Details
Copper: Southern Copper mined 237,542 tons of copper in the reported quarter, down 8.5% year over year due to lower ore grades and recoveries. In 2021, copper production was down 4.3% year over year to 958,200 tons due to a temporary drop in ore grades and recoveries across all of its mines. However, production came in higher than the company’s expectation of 943,000 tons.
SCCO anticipates producing 922,000 tons of copper in 2022 and 1 million tons in 2023.
Molybdenum: The company mined 7,977 tons of molybdenum in the reported quarter, reflecting a year-over-year improvement of 5.6%. Higher production at both the Toquepala and Buenavista mines was partially offset by lower production at the Cuajone and La Caridad mines.
Molybdenum production was 30,262 tons in 2021 compared with 30,248 tons in 2020.
Zinc: The company’s zinc production decreased 1.6% year over year to 16,487 tons in the quarter under review. Increased output at the San Martin mine was partially offset by lower production in Santa Barbara. Zinc production decreased 2.9% year over year to 66,958 tons in 2021.
Silver: Southern Copper’s silver production fell 16.3% year over year to 4,526,000 ounces due to lower production at Buenavista, IMMSA and Toquepala operations. In 2021, silver production was down 12% year over year.
Financials
Southern Copper generated net cash from operating activities of $4,292.4 million in 2021, a 54% improvement from $2,783.6 million in the prior year, attributable to higher metal prices and cost-control efficiencies. Cash and cash equivalents were $3,002 million at the end of 2021, up from $2,184 million as of 2020 end. Long-term debt was $6,247.9 million at the 2021 end compared with $6,544 million as of the 2020 end. SCCO made capital investments worth $892.3 million during 2021.
Fiscal 2021 Performance
Southern Copper’s adjusted earnings was $4.39 in fiscal 2021, which missed the Zacks Consensus Estimate of $4.43. However, earnings was 116% higher than the prior fiscal. Total revenues advanced 37% year over year to a record $10.93 billion, which beat the Zacks Consensus Estimate of $10.92 million.
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 11.11% due to these changes.
VGM Scores
At this time, Southern Copper has a strong Growth Score of A, a grade with the same score on the momentum front. However, 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 A. 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 #4 (Sell). We expect a below average return from the stock in the next few months.
Just Released: Zacks Top 10 Stocks for 2022
In addition to the investment ideas discussed above, would you like to know about our 10 top picks for the entirety of 2022?
From inception in 2012 through 2021, the
Zacks Top 10 Stocks
portfolios gained an impressive +1,001.2% versus the S&P 500’s +348.7%. Now our Director of Research has combed through 4,000 companies covered by the Zacks Rank and has handpicked the best 10 tickers to buy and hold. Don’t miss your chance to get in…because the sooner you do, the more upside you stand to grab.
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