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Southern Copper (SCCO) Q4 Earnings Miss Estimates, Sales Beat

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Southern Copper Corporation SCCO reported fourth-quarter 2021 earnings of $1.08 per share, which missed the Zacks Consensus Estimate of $1.12. The bottom line improved 42% from the prior-year quarter, primarily driven by higher sales on upbeat prices for its main metals and the company’s efforts to improve cost efficiency and productivity that helped offset the impact of higher costs.

Net sales were $2,823.7 million, up 20% year over year. The top line beat the Zacks Consensus Estimate of $2,605 million. Revenues were primarily driven by higher metal prices for copper (35.4%), molybdenum (107.5%) and zinc (28.6%). Gold and silver prices were down 4.2% and 4.7%, respectively. The company witnessed lower sales volume at its Peruvian operations due to bi-annual maintenance at the Ilo smelter.

Operating cash cost per pound of copper (net of by-product revenue credits) was 76 cents in the quarter under review, up 13% from the year-ago quarter. Total operating costs inched up 1% year over year to $1,293 million.

Southern Copper Corporation Price, Consensus and EPS Surprise

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

Southern Copper Corporation price-consensus-eps-surprise-chart | Southern Copper Corporation Quote

Operating profit surged 43.5% to $1,530.6 million on higher sales. Operating margin in the reported quarter was 54.2% compared with 45.4% in the prior-year quarter. Adjusted EBITDA improved 38% year over year to $1,726.5 million in fourth-quarter 2021. Adjusted EBITDA margin was 61.1% compared with the year-ago quarter figure of 53.4%.

Production Details

Copper: Southern Copper mined 237,542 tons of copper in the reported quarter, down 8.5% year over year due to lower ore grades and recoveries. In 2021, copper production was down 4.3% year over year to 958,200 tons due to a temporary drop in ore grades and recoveries across all of its mines. However, production came in higher than the company’s expectation of 943,000 tons.

SCCO anticipates producing 922,000 tons of copper in 2022 and 1 million tons in 2023.

Molybdenum: The company mined 7,977 tons of molybdenum in the reported quarter, reflecting a year-over-year improvement of 5.6%. Higher production at both the Toquepala and Buenavista mines was partially offset by lower production at the Cuajone and La Caridad mines.

Molybdenum production was 30,262 tons in 2021 compared with 30,248 tons in 2020.

Zinc: The company’s zinc production decreased 1.6% year over year to 16,487 tons in the quarter under review. Increased output at the San Martin mine was partially offset by lower production in Santa Barbara. Zinc production decreased 2.9% year over year to 66,958 tons in 2021.

Silver: Southern Copper’s silver production fell 16.3% year over year to 4,526,000 ounces due to lower production at Buenavista, IMMSA and Toquepala operations. In 2021, silver production was down 12% year over year.

Financials

Southern Copper generated net cash from operating activities of $4,292.4 million in 2021, a 54% improvement from $2,783.6 million in the prior year, attributable to higher metal prices and cost-control efficiencies. Cash and cash equivalents were $3,002 million at the end of 2021, up from $2,184 million as of 2020 end. Long-term debt was $6,247.9 million at the 2021 end compared with $6,544 million as of the 2020 end. SCCO made capital investments worth $892.3 million during 2021.

Fiscal 2021 Performance

Southern Copper’s adjusted earnings was $4.39 in fiscal 2021, which missed the Zacks Consensus Estimate of $4.43. However, earnings was 116% higher than the prior fiscal. Total revenues advanced 37% year over year to a record $10.93 billion, which beat the Zacks Consensus Estimate of $10.92 million.

Price Performance

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Shares of Southern Copper have declined 9.1% in the past year against the industry’s growth of 11%.

Zacks Rank & Stocks to Consider

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

Some better-ranked stocks in the basic materials space include Commercial Metals Company CMC, Nutrien NTR and Huntsman Corporation HUN. While CMC sports a Zacks Rank #1 (Strong Buy), MP and HUN carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Commercial Metals has a projected earnings growth rate of 62% for the current fiscal year. The Zacks Consensus Estimate for CMC's current fiscal year earnings has been revised upward by 40% over the past 60 days.

Commercial Metals beat the Zacks Consensus Estimate for earnings in three of the trailing four quarters and missed once, the average surprise being 13.1%. CMC’s shares have surged around 68% in a year’s time.

Nutrien has an expected earnings growth rate of 54% for the current fiscal. The Zacks Consensus Estimate for NTR’s current-year earnings has moved up 15% in the past 60 days.

Nutrien beat the Zacks Consensus Estimate for earnings in three of the trailing four quarters and missed once, the average surprise being 73.5%. NTR has rallied around 38% in a year.

Huntsman has an expected earnings growth rate of 10% for the current year. HUN's consensus estimate for the current year has been revised upward by 1% over the past 60 days.

Huntsman beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average surprise being 12.8%. HUN shares have appreciated around 31% in a year.


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