Investors in Southern Copper Corporation (NYSE:SCCO) had a good week, as its shares rose 3.6% to close at US$32.91 following the release of its first-quarter results. Sales of US$1.7b surpassed estimates by 2.7%, although statutory earnings per share missed badly, coming in 33% below expectations at US$0.28 per share. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Following the recent earnings report, the consensus from twelve analysts covering Southern Copper is for revenues of US$6.24b in 2020, implying an uncomfortable 14% decline in sales compared to the last 12 months. Statutory earnings per share are expected to nosedive 32% to US$1.15 in the same period. Before this earnings report, the analysts had been forecasting revenues of US$6.25b and earnings per share (EPS) of US$1.17 in 2020. The consensus analysts don’t seem to have seen anything in these results that would have changed their view on the business, given there’s been no major change to their estimates.
The analysts reconfirmed their price target of US$33.80, showing that the business is executing well and in line with expectations. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Southern Copper at US$47.00 per share, while the most bearish prices it at US$24.00. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We would highlight that sales are expected to reverse, with the forecast 14% revenue decline a notable change from historical growth of 8.2% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 6.7% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining – Southern Copper is expected to lag the wider industry.
The Bottom Line
The most obvious conclusion is that there’s been no major change in the business’ prospects in recent times, with the analysts holding their earnings forecasts steady, in line with previous estimates. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations – although our data does suggest that Southern Copper’s revenues are expected to perform worse than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year’s earnings. We have forecasts for Southern Copper going out to 2023, and you can see them free on our platform here.
Before you take the next step you should know about the 3 warning signs for Southern Copper that we have uncovered.
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