Morgan Stanley Downgrades Southern Copper Due to Lower Production and Higher Cash Costs

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Morgan Stanley has recently downgraded Southern Copper ($NYSE:SCCO), a major integrated mining company, citing their lower production outlook and increased cash costs. Based in Phoenix, Arizona, Southern Copper Corporation is a mining company that engages in the production of copper, molybdenum, zinc and silver. It is one of the world’s largest integrated copper producers and has operations in Peru, Mexico and Chile. The lowered production outlook has caused Morgan Stanley to reduce their previous rating of an “overweight” stock to an “equal-weight” rating. This is based on their assessment of the company’s cash costs, which have been rising due to increases in prices of energy, labor and other inputs.

Additionally, the drop in copper prices has further impacted their cash costs. As a result, Morgan Stanley believes that Southern Copper’s earnings could be affected negatively in the short-term. Despite the downgrade of their stock rating, Southern Copper remains an attractive option for investors due to its strong operating performance and commitment to high quality standards. As a result, many analysts still consider it as a good long-term investment option. Furthermore, Southern Copper’s commitment to social responsibility, with initiatives such as helping to provide health services and scholarships to local communities, could constitute an additional benefit for investors.

Share Price

This resulted in the stock opening at $72.2 and closing at $71.0, a decrease of 4.3% from the previous closing price of 74.2. The downgrade reinforces concerns about the company’s ability to meet production expectations and capex demands in the coming quarters with lower cash flows. With decreasing production and rising costs, analysts have expressed concerns about Southern Copper’s profitability and long-term prospects. Live Quote…

About the Company

Income Snapshot

Below shows the total revenue, net income and net margin for Southern Copper. More…

Cash Flow Snapshot

Below shows the cash from operations, investing and financing for Southern Copper. More…

Balance Sheet Snapshot

Below shows the total assets, liabilities and book value per share for Southern Copper. More…

Key Ratios Snapshot

Some of the financial key ratios for Southern Copper are shown below. More…

Analysis

At GoodWhale, we’ve studied SOUTHERN COPPER‘s fundamentals and have drawn some useful conclusions. According to our Star Chart, SOUTHERN COPPER is classified as ‘rhino’, meaning it has achieved moderate revenue or earnings growth. This makes SOUTHERN COPPER an interesting option for investors who are looking for a stable, mid-range company. SOUTHERN COPPER scores well in terms of assets, dividends, and profitability. Its growth rate is moderate, making it a decent option for those seeking out steady returns. What’s more, its health score is 9/10, based on its cashflows and debt, which means that it can safely ride out any crisis without the risk of bankruptcy. More…

Peers

The global copper industry is highly competitive, with a large number of companies vying for market share. Southern Copper Corp is one of the largest copper producers in the world, and competes against China Nonferrous Mining Corp Ltd, Hindustan Copper Ltd, and Jiangxi Copper Co Ltd, among others. The company has a long history dating back to 1902, and has a strong position in the market. Southern Copper Corp is a vertically integrated company, meaning it is involved in all aspects of the copper mining process, from exploration and development to mining, smelting, and refining. The company has a diversified portfolio of assets and operations, and is one of the lowest-cost copper producers in the world. Southern Copper Corp is well-positioned to compete in the global copper industry.

– China Nonferrous Mining Corp Ltd ($SEHK:01258)

The company’s market cap is 11.67B as of 2022, a Return on Equity of 29.54%. The company is engaged in the business of nonferrous metals mining and operates a number of mines in China. It is also engaged in the smelting and refining of nonferrous metals. The company’s products include copper, aluminum, lead, zinc, nickel, tin, and precious metals.

– Hindustan Copper Ltd ($BSE:513599)

Hindustan Copper Ltd is an Indian copper mining company with a market cap of 103.42B as of 2022. The company has a Return on Equity of 13.71%. Hindustan Copper Ltd is engaged in the business of copper mining, smelting, and refining. The company has mines in Jharkhand and Rajasthan, and a plant in Gujarat. The company produces copper cathodes, copper rods, and copper wire. Hindustan Copper Ltd also produces gold and silver.

– Jiangxi Copper Co Ltd ($SHSE:600362)

Jiangxi Copper Co Ltd is a Chinese company that produces and supplies copper. The company has a market cap of 44.09B as of 2022. The company’s Return on Equity is 8.5%. Jiangxi Copper Co Ltd produces copper cathodes, copper rods, and copper wire. The company also produces gold, silver, and other metals. Jiangxi Copper Co Ltd is headquartered in Jiangxi Province, China.

Summary

Southern Copper is a copper mining company that has recently come under pressure due to lower than expected production levels, coupled with higher than estimated cash costs. This has led to lower than expected profits and a corresponding drop in the stock price. Investors should take a closer look at the company’s financials to determine if the drop is justified, or if it presents a buying opportunity.

Analysts should also pay close attention to production and cost levels to ensure that they remain manageable and that any financial discrepancies are swiftly addressed. It may also be worth considering whether buying into Southern Copper now could be a good long-term investment, or if other copper-mining stocks present a better value.