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Southern Copper Gets Stock Kiss of Death from Some Analysts

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Earnings season

Southern Copper (SCCO) is expected to release its 3Q16 earnings later this month. In this article, we’ll see how analysts are rating Southern Copper this earnings season. According to consensus estimates compiled by Bloomberg, Southern Copper has a one-year price target of $28.41. This is 8.1% above its current stock price. Freeport-McMoRan (FCX) is trading 18% below its consensus price target.

Of the 23 analysts surveyed by Bloomberg, only four rated Southern Copper (SCCO) a “buy,” while seven rated it a “sell.” Most of the analysts rate the stock a “hold.”

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Analyst action

The above graph shows Wall Street analysts’ recent action for Southern Copper (SCCO). On October 11, UBS raised SCCO’s one-year price target to $39 from $34 while maintaining its “buy” rating. This represents a 48% upside over current price levels.

Most other analysts have maintained their respective ratings and target prices this month. Credit Suisse is one of the most bearish brokerages on SCCO and set a price target of $21 for the stock.

Pure-play copper producer

Southern Copper (SCCO) is a pure-play copper producer. The company is ramping up its copper production, and its unit copper costs are lower compared to some of the other companies in this space (GNR).

While other copper producers such as Freeport-McMoRan (FCX) are selling their copper assets, Southern Copper is in the midst of an aggressive expansion plan. Expansion plans would lead to a higher copper production profile for SCCO in the coming years, while FCX could see its copper production fall after asset sales.

In the final article in this series, we’ll see how analysts are rating Turquoise Hill Resources (RIO) (TRQ), which is another pure-play copper producer.

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