The Federal Reserve’s tightening monetary policy has fostered negative investor sentiment, precipitating a market correction. Furthermore, the copper industry continues to witness production shortages and supply chain issues. However, the demand for copper remains high across sectors that include power, infrastructure, energy, and others. And according to Wood Mackenzie, global demand for copper will be 50% higher in 2040 than in 2020.
Goldman Sachs analysts have estimated that copper prices will attain record highs in the coming quarters, which could help fundamentally sound copper companies generate solid revenue. Also, Chile, the world’s largest copper producer, has increased its copper price estimates for 2022 to an average of $4.40/pound.
Given this backdrop, we think it could be wise to bet on fundamentally strong copper stocks Southern Copper Corporation (SCCO) and Freeport-McMoRan Inc. (FCX), which have witnessed price dips lately.
Southern Copper Corporation (SCCO)
Phoenix, Ariz.-based SCCO, a subsidiary of Americas Mining Corporation, mines, explores for, smelts, and refines copper and other minerals in Peru, Mexico, Argentina, Ecuador, and Chile. It is one of the world’s largest integrated copper producers.
SCCO’s net sales increased 9.1% year-over-year to $2.76 billion for the first quarter ended March 31, 2022. The company’s smelted copper production came in at 157,418 tons, up 3.8% year-over-year. Its operating income came in at $1.47 billion, up 8.8% year-over-year. Also, its net income came in at $787.80 million, up 2.7% year-over-year, while its EPS came in at $1.02, up 3% year-over-year.
For fiscal year 2023, analysts expect SCCO’s revenue to be $11.64 billion, representing an 8.1% year-over-year rise. In addition, the company’s EPS is expected to increase by 21.3% per annum for the next five years. Over the past month, the stock has declined 15.8% in price to close Friday’s trading session at $61.41.
SCCO’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to a Buy in our POWR Rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
Also, the stock has an A grade for Quality and a B grade for Stability. Within the Industrial – Metals industry, it is ranked #6 out of 37 stocks. Click here to see the additional POWR Ratings for Growth, Value, Momentum, and Sentiment for SCCO.
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