On Monday, JPMorgan revised its stance on Southern Copper (NYSE:SCCO), upgrading the stock from Underweight to Neutral and increasing the price target to $92.50, up from the previous target of $68.00.
The adjustment reflects the firm's recognition of Southern Copper's significant exposure to copper, with approximately 85% of its revenues derived from the metal, making it a prime candidate for investors seeking to invest in copper.
The company has demonstrated strong performance, with a 36.7% return over the past year and maintains a robust financial health score according to InvestingPro analysis.
The rationale behind the upgrade is attributed to Southern Copper's consistent premium over its peers, trading at 9-10 times EV/EBITDA, whereas its counterparts are typically valued at half that multiple. Current metrics from InvestingPro show an EV/EBITDA of 14.0x and a P/E ratio of 26.1x, indicating the stock trades above its historical average.
This premium is justified by Southern Copper's status as a leading proxy for copper investments, akin to a specialized copper exchange-traded fund (ETF). For investors seeking deeper valuation insights, InvestingPro offers 12 additional key metrics and tips.
The analyst from JPMorgan acknowledges the addition of the Tia Maria project into their estimates, coupled with a positive outlook on copper prices, as the basis for the upgraded rating.
The revised price target of $92.50 per share, which is set for December 2025, indicates an anticipated downside of 8% from the current share prices. Notable for income investors, the company offers a 2.79% dividend yield and has maintained dividend payments for 29 consecutive years.
Southern Copper's high exposure to copper is a central factor in its valuation and attractiveness to investors. The company's performance is closely tied to the price and demand for copper, which is a key industrial metal used across various sectors.
The updated price target and stock rating by JPMorgan suggest a neutral outlook for Southern Copper, with the firm's analysis indicating that the company's stock price may have limited upside potential in the near term based on current market conditions.
In other recent news, Southern Copper Corp. (NYSE:SCCO) reported its third-quarter earnings, which exceeded analyst expectations, though its revenue was slightly below estimates. The company posted adjusted earnings per share of $1.15 for the third quarter, surpassing the analyst consensus of $1.11. However, revenue for the same period totaled $2.93 billion, narrowly missing the estimated $2.94 billion.
Citi analysts noted that the third-quarter EBITDA of $1.7 billion was in line with their expectations. They highlighted that mined copper production had increased by 12% YoY and 5% QoQ, marking the best quarter since 2020 due to improved grades in both Mexico and Peru. The firm currently holds a sell rating on Southern Copper shares.
In other developments, Southern Copper is reviewing its historical capital budget for the Tia Maria Project, which currently stands at $1.4 billion. An update to the budget is expected by the end of the year. The company also plans to initiate construction, training, and earthmoving activities in the coming months, with construction set to begin in 2025.
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