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SCCO Is Getting No Love from Analysts as Copper Prices Tumble

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Jul. 9 2018, Updated 9:03 a.m. ET

Southern Copper

Southern Copper (SCCO) hasn’t received any “buy” or equivalent ratings. Four analysts have rated Southern Copper stock as a “hold.” The remaining five analysts polled by Thomson Reuters on July 5 rated the stock as a “sell” or lower.

Southern Copper carries a mean consensus target price of $46.3, which represents a potential upside of 2.0% from its closing price on July 5.

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High valuation

Southern Copper is investing in new expansion projects. The projects are expected to boost the company’s copper production in the next decade. The company also has low costs per unit and enviable EBITDA margins. On the flip side, Southern Copper’s valuation multiples, which are the highest among the copper miners under review in this series, leave little scope for further valuation upside.

In terms of earnings, the recent slide in copper prices could hurt the earnings of SCCO and other copper miners, such as Freeport-McMoRan (FCX) and Antofagasta (ANTO).

Speaking of Southern Copper’s new exploration and expansion projects, they’re expected to come online when copper is largely expected to be in a deficit. However, it’s worth noting that several copper mining projects in Latin America have faced backlash from local communities.

Second-quarter earnings

Analysts polled by Thomson Reuters expect Southern Copper to post revenue of $1.79 billion in the second quarter compared to $1.84 billion in the first quarter. The company’s adjusted EBITDA is expected to rise to $971 million in the second quarter compared to $939 million in the first quarter.

In the next article, we’ll see how analysts are rating Glencore (GLNCY).

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