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Southern Copper (SCCO) Earnings & Sales Miss Estimates in Q4

Zacks Equity Research

Southern Copper Corporation SCCO reported fourth-quarter 2018 earnings of 38 cents per share, missing the Zacks Consensus Estimate of 49 cents. The company reported net income of $293.2 million. These figures show improvement from net loss of $288 million or 37 cents recorded a year ago.
Net sales came in at $1,695 million, lagging the Zacks Consensus Estimate of $1,795 million. The figure dropped 9.1% year over year.
Adjusted EBITDA declined 21% year over year to $793 million in the fourth quarter. Adjusted EBITDA margin was 46.8% compared with 53.6% in the prior-year quarter.

Southern Copper Corporation Price, Consensus and EPS Surprise


Southern Copper Corporation Price, Consensus and EPS Surprise | Southern Copper Corporation Quote


Operating Highlights

Copper: Southern Copper produced 234,991 tons of copper during the reported quarter, up 4% year over year. This was driven by higher production at Toquepala mine as a result of additional copper production of 8,630 tons from the new concentrator.
Molybdenum: The company mined 5,657 tons of molybdenum during the fourth quarter, reflecting a year-over-year increase of 7.5%.
Zinc: The company’s zinc production increased 27% year over year to 17,590 tons in the fourth quarter of 2018.
Silver: Southern Copper’s silver production improved 14% year over year to 4,299,000 ounces.

The company’s net cash from operating activities in 2018 increased to $2,235 million from $1,977 million in 2017. This improvement can be attributed to strong cash generation from operations owing to higher sales volume and metal prices.
Cash and cash equivalents went down to $845 million at the end of 2018 from $1,005 million at the end of 2017. Long-term debt increased to $5,960 million at 2018 end from $5,957 million at the end of the prior year.
As of Dec 31, 2018, capital investments were $1,121 million compared with $1,024 million in 2017. This includes $334.3 million for the Toquepala expansion. The company’s new-state-of-the-art concentrator will increase Toquepala´s annual copper production to 258,000 tons, reflecting a 52% production increase in 2019 compared to 2018. In the second quarter of 2019, the company expects to reach full capacity at its new Toquepala concentrator.

Due to recent heavy rain in Peru's southern copper belt, the company suspended operations for three to five days at its copper ore concentrators during a downpour at its Cuajone mine and Toquepala mine. Concentrators will start operations following repairs and upgradation.
On Jan 24, 2019, Southern Copper’s board of directors authorized a dividend of 40 cents per share. The dividend will be paid on Feb 26, 2019, to shareholders of record at the close of business as on Feb 12, 2019.

2018 Results

Southern Copper reported adjusted earnings per share of $2.00 in 2018, up 113% from 94 cents in the prior year. Earnings lagged the Zacks Consensus Estimate of $2.12.
Sales increased 6.6% year over year to $7.01 billion, marking the highest on record owing to increased prices of copper, molybdenum and zinc. The top line missed the Zacks Consensus Estimate of $7.19 billion.

Shares of Southern Copper have declined 35.5% in the past year compared with the industry’s decline of 35.1%.

Zacks Rank & Stocks to Consider

Southern Copper currently carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the basic materials space include Rio Tinto plc RIO, The Mosaic Company MOS and Israel Chemicals Ltd ICL. While Rio Tinto and Mosaic currently sports a Zacks Rank #1 (Strong Buy), Israel Chemicals carries Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Rio Tinto has an expected earnings growth rate of 5.1% for 2019. The company’s shares have moved up 0.1% in the past year.

Mosaic has an expected earnings growth rate of 23.9% for 2019. Its shares have gained 22.7% in a year’s time.

Israel Chemicals has an expected earnings growth rate of 11.1% for 2019. Its shares have rallied 37.6% in a year’s time.

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