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A week ago, Southern Copper Corporation (NYSE:SCCO) came out with a strong set of third-quarter numbers that could potentially lead to a re-rate of the stock. Southern Copper beat earnings, with revenues hitting US$2.1b, ahead of expectations, and statutory earnings per share outperforming analyst reckonings by a solid 18%. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Taking into account the latest results, the consensus forecast from Southern Copper's twelve analysts is for revenues of US$8.19b in 2021, which would reflect a meaningful 9.4% improvement in sales compared to the last 12 months. Statutory earnings per share are predicted to jump 43% to US$2.38. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$8.03b and earnings per share (EPS) of US$2.29 in 2021. So the consensus seems to have become somewhat more optimistic on Southern Copper's earnings potential following these results.
The consensus price target was unchanged at US$42.23, implying that the improved earnings outlook is not expected to have a long term impact on value creation for shareholders. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Southern Copper analyst has a price target of US$56.00 per share, while the most pessimistic values it at US$29.00. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. Next year brings more of the same, according to the analysts, with revenue forecast to grow 9.4%, in line with its 8.7% annual growth over the past five years. Compare this with the wider industry, which analyst estimates (in aggregate) suggest will see revenues grow 8.2% next year. So although Southern Copper is expected to maintain its revenue growth rate, it's only growing at about the rate of the wider industry.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Southern Copper's earnings potential next year. They also reconfirmed their revenue estimates, with the company predicted to grow at about the same rate as the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. At Simply Wall St, we have a full range of analyst estimates for Southern Copper going out to 2024, and you can see them free on our platform here..
That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with Southern Copper , and understanding these should be part of your investment process.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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