Southern Copper is Monday's IBD Stock Of The Day, as the mining giant is near a buy point with copper prices holding steady since late March. SCCO stock rose slightly Monday.
The copper futures price fell 1.1%, reversing from near short-term highs amid signs of tight supply and strong demand in China. In February, output from top producer Chile sank 3.7%, with low supply from Peru due to political unrest.
A bet on copper is a bet on a stronger global economy as well as green energy. Copper is used heavily in renewable energy projects and electric vehicles.
Southern Copper engages in the development, production and exploration of copper, zinc, silver and other minerals and metals. It has operations in Peru and Mexico. The company trades on the New York Stock Exchange and the Lima Stock Exchange.
Southern Copper topped Q4 earnings estimates in early February. EPS grew 8% to $1.17 after two quarters of hefty year-over-year declines. Revenue was essentially flat at $2.82 billion. For 2022, Southern Copper earnings retreated 22% to $3.41 per share, with sales down 8% to $10.05 billion.
Wall Street expects Southern Copper to report first-quarter earnings in May. Analysts forecast EPS falling 11% to 91 cents and revenue dropping 6% to $2.59 billion.
Southern Copper Stock
SCCO advanced 1.3% to 77.24 Monday during market trading. Southern Copper stock jumped 28% so far in 2023, primarily thanks to a 29% run from the beginning of the year to Jan. 18.
SCCO has formed a double-bottom base with an official 78.75 buy point, according to MarketSmith analysis.
Southern Copper stock reclaimed its 50-day moving average on March 29, offering an early entry. Investors could still use that entry, though SCCO is close to the official buy point.
On a weekly chart, Southern Copper stock is in a cup-with-handle pattern dating back to April 2022, with the daily chart's double-bottom base serving as the handle. The buy point on that massive cup-with-handle is 78.86.
More broadly, SCCO stock is close to breaking out of a two-year consolidation.
Fellow mining giant Freeport-McMoRan also has a double-bottom base and could have an entry with a decisive move over its 50-day line. This comes as China's reopening is supporting copper prices and Freeport revs up operations in Indonesia after landslides. FCX stock hit resistance at the 50-day line on Monday, but edged up 0.7% Monday.
Southern Copper stock is the top-ranked company in IBD's Mining-Metal Ores industry group. SCCO has an 87 Composite Rating out of 99. Southern Copper stock has a 94 Relative Strength Rating. The EPS Rating is 71 out of 99.
SCCO Stock Downgrade
Last week, Morgan Stanley analyst Carlos De Alba downgraded Southern Copper stock to an "Equal Weight" rating, down from "Overweight." The analyst maintained a SCCO price target of 70. But De Alba wrote that he's still upbeat long term on decarbonization/electrification trends that support demand for key metals and challenging conditions to develop new supply.
Copper is a key industrial metal, and is used heavily in electric vehicles.
Southern Copper stock has outperformed its copper peers over the past year, and its risk/reward is now more balanced with the stock more adequately reflecting the company's strong cash generation and consistent returns to shareholders, according to De Alba.
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