Southern Copper Corp.
Company Description
Southern Copper Corp. is one of the world’s largest copper companies, with operations in Peru, Mexico and Chile and a market cap of $44 billion. The company has been in business since 1952 and is based out of Phoenix, AZ.
With copper prices reaching for the sky, it doesn’t take a genius to figure out copper companies should be killing it. That was on display in late October when Southern Copper reported another strong quarter.
Third-Quarter Results
Revenue for the period was up 10% from last year to $1.28 billion. Although earnings fell 5 cents short of the Zacks Consensus Estimate, income was still up 17% from last year.
The good quarter was driven by a simple combination of higher prices and increased production, up 4.1% from last year to 125,193 million tons.
Looking forward, SCCO has some hedges in place to temper volatility, but with more than 85% of the company’s total 2011 production tied to cash prices, higher copper prices will hit the bottom line.
Financial Profile
Southern Copper will also benefit from a strong financial profile, with more than $2.2 billion in cash and equivalents on the balance sheet. Its total debt load of $2.7 billion in light of its valuation and asset base.
Estimates
We’ve seen some weakness in the current-year estimate over the last few months on some special charges, but the next-year estimate is up nicely to $3.21, a bullish 80% growth projection.
Valuation
Although SCCO does trade at a premium to its peers, its PEG ratio of .18 is well below the value benchmark of 1.
Michael Vodicka is the Momentum Stock Strategist for Zacks.com. He is also the Editor in charge of the market-beating Zacks Momentum Trader Service.
