FOUND POSTS

Check out our latest analysis for Southern Copper

Looking at Southern Copper Corporation's (NYSE:SCCO ) insider transactions over the last year, we can see that insiders were net sellers. That is, there were more number of shares sold by insiders than there were purchased.

While insider transactions are not the most important thing when it comes to long-term investing, we do think it is perfectly logical to keep tabs on what insiders are doing.

The Last 12 Months Of Insider Transactions At Southern Copper

The Independent Director, Vicente Ariztegui Andreve, made the biggest insider sale in the last 12 months. That single transaction was for US$114k worth of shares at a price of US$76.11 each. So it's clear an insider wanted to take some cash off the table, even below the current price of US$78.65. As a general rule we consider it to be discouraging when insiders are selling below the current price, because it suggests they were happy with a lower valuation. However, while insider selling is sometimes discouraging, it's only a weak signal. We note that the biggest single sale was only 25% of Vicente Ariztegui Andreve's holding. Vicente Ariztegui Andreve was the only individual insider to sell shares in the last twelve months.

You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

insider-trading-volume

If you like to buy stocks that insiders are buying, rather than selling, then you might just love this free list of companies. (Hint: insiders have been buying them).

Insiders At Southern Copper Have Sold Stock Recently

Over the last three months, we've seen significant insider selling at Southern Copper. In total, Independent Director Vicente Ariztegui Andreve sold US$114k worth of shares in that time, and we didn't record any purchases whatsoever. This may suggest that some insiders think that the shares are not cheap.

Insider Ownership

For a common shareholder, it is worth checking how many shares are held by company insiders. I reckon it's a good sign if insiders own a significant number of shares in the company. Insiders own 0.08% of Southern Copper shares, worth about US$47m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.

So What Do The Southern Copper Insider Transactions Indicate?

An insider sold stock recently, but they haven't been buying. And even if we look at the last year, we didn't see any purchases. Insiders own shares, but we're still pretty cautious, given the history of sales. We're in no rush to buy! In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Southern Copper. Be aware that Southern Copper is showing 3 warning signs in our investment analysis, and 1 of those can't be ignored…

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

For the purposes of this article, insiders are those individuals who report their transactions to the relevant regulatory body. We currently account for open market transactions and private dispositions, but not derivative transactions.

Southern Copper (NYSE:SCCO) has had a great run on the share market with its stock up by a significant 9.1% over the last month. Since the market usually pay for a company’s long-term fundamentals, we decided to study the company’s key performance indicators to see if they could be influencing the market. In this article, we decided to focus on Southern Copper’s ROE.

Return on equity or ROE is a key measure used to assess how efficiently a company’s management is utilizing the company’s capital. In other words, it is a profitability ratio which measures the rate of return on the capital provided by the company’s shareholders.

Check out our latest analysis for Southern Copper

How To Calculate Return On Equity?

The formula for ROE is:

Return on Equity = Net Profit (from continuing operations) ÷ Shareholders’ Equity

So, based on the above formula, the ROE for Southern Copper is:

33% = US$2.6b ÷ US$8.1b (Based on the trailing twelve months to December 2022).

The ‘return’ is the income the business earned over the last year. Another way to think of that is that for every $1 worth of equity, the company was able to earn $0.33 in profit.

Why Is ROE Important For Earnings Growth?

Thus far, we have learned that ROE measures how efficiently a company is generating its profits. Based on how much of its profits the company chooses to reinvest or “retain”, we are then able to evaluate a company’s future ability to generate profits. Assuming everything else remains unchanged, the higher the ROE and profit retention, the higher the growth rate of a company compared to companies that don’t necessarily bear these characteristics.

Southern Copper’s Earnings Growth And 33% ROE

Firstly, we acknowledge that Southern Copper has a significantly high ROE. Additionally, the company’s ROE is higher compared to the industry average of 17% which is quite remarkable. As a result, Southern Copper’s exceptional 26% net income growth seen over the past five years, doesn’t come as a surprise.

Next, on comparing Southern Copper’s net income growth with the industry, we found that the company’s reported growth is similar to the industry average growth rate of 31% in the same period.

past-earnings-growth

The basis for attaching value to a company is, to a great extent, tied to its earnings growth. It’s important for an investor to know whether the market has priced in the company’s expected earnings growth (or decline). Doing so will help them establish if the stock’s future looks promising or ominous. If you’re wondering about Southern Copper’s’s valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

Is Southern Copper Using Its Retained Earnings Effectively?

Southern Copper’s significant three-year median payout ratio of 83% (where it is retaining only 17% of its income) suggests that the company has been able to achieve a high growth in earnings despite returning most of its income to shareholders.

Moreover, Southern Copper is determined to keep sharing its profits with shareholders which we infer from its long history of paying a dividend for at least ten years. Upon studying the latest analysts’ consensus data, we found that the company is expected to keep paying out approximately 74% of its profits over the next three years. As a result, Southern Copper’s ROE is not expected to change by much either, which we inferred from the analyst estimate of 29% for future ROE.

Summary

Overall, we are quite pleased with Southern Copper’s performance. We are particularly impressed by the considerable earnings growth posted by the company, which was likely backed by its high ROE. While the company is paying out most of its earnings as dividends, it has been able to grow its earnings in spite of it, so that’s probably a good sign. That being so, a study of the latest analyst forecasts show that the company is expected to see a slowdown in its future earnings growth. Are these analysts expectations based on the broad expectations for the industry, or on the company’s fundamentals? Click here to be taken to our analyst’s forecasts page for the company.

For Immediate Release

Chicago, IL – March 2, 2023 – Zacks Market Edge is a podcast hosted weekly by Zacks Stock Strategist Tracey Ryniec. Every week, Tracey will be joined by guests to discuss the hottest investing topics in stocks, bonds and ETFs and how it impacts your life. To listen to the podcast, click here: https://www.zacks.com/stock/news/2060610/which-commodity-stocks-should-be-on-your-short-list

Which Commodity Stocks Should Be on Your Short List?

Welcome to Episode #350 of the Zacks Market Edge Podcast.

(3:00) – Breaking Down Oil’s Current Performance: What Should Investors Expect Going Forward?
(11:50) – The Smart Metal: What Is Copper Telling Us About The Economy?
(16:35) – Is Steel A Good Long Term Investment?
(20:40) – What Should Investors Know About Chicken: The Wing Stop Story
(28:40) – What Commodity Trends Should You Be Keeping On Your Radar?
(32:15) – Episode Roundup: PXD, RRC, ROCC, APA, FANG, LNG, FCX, SCCO, CLF, NUE, WING, GDX, GDXJ
Podcast@Zacks.com

Every week, host and Zacks stock strategist, Tracey Ryniec, will be joined by guests to discuss the hottest investing topics in stocks, bonds and ETFs and how it impacts your life.

This week, Tracey tapped the knowledge and expertise of the editor of the Zacks Commodity Innovator newsletter, Jeremy Mullin, to take a deep dive into what is going on in commodities in 2023. In 2022, commodities went on a wild ride as the Ukraine War caused many commodities to spike higher. Some, like oil, traded at 10-year highs.

But many of those commodities have since fallen back to pre-Ukraine War levels. Are there buying opportunities in some of those stocks?

5 Commodity Stocks to Watch in 2023

1. Cheniere Energy (LNG)

Cheniere Energy is a large-cap liquid natural gas producer headquartered in Houston. Earnings are expected to jump 165% in 2023 to $14.95 from $5.64.

Shares are up 22% over the last year and have recently rallied 6.6% in the last 5 sessions. Cheniere is cheap, with a forward P/E of just 10.6.

Cheniere also pays a dividend, currently yielding 1%.

Should a liquid natural gas producer like Cheniere be on your watch list?

2. Freeport-McMoran (FCX)

Freeport-McMoran is a copper producer. Copper prices came down from their Ukraine War highs but are now back over $4.00 per pound again.

Shares of Freeport-McMoran are down 13.4% over the last year but in 2023, they have rallied 8%. Freeport is trading at 20x forward earnings. It pays a dividend yielding 1.5%.

Is it time for copper and Freeport-McMoran in 2023?

3. Southern Copper Corp. (SCCO)

Southern Copper is a large cap copper producer. The Zacks Consensus Estimate for 2023 is calling for $3.40, which is down only a penny from 2022’s earnings of $3.41.

Shares of Southern Copper have rallied 22.3% year-to-date. It trades with a forward P/E of 21.

But many investors like Southern Copper because of its generous dividend, which is currently yielding 4.8%.

Should Southern Copper be on your commodities stock short list?

4. Cleveland-Cliffs Inc. (CLF)

Cleveland-Cliffs is the largest flat-rolled steel producer in North America.

Shares of Cleveland-Cliffs are up 33% year-to-date but are still cheap, with a forward P/E of 12.9. Earnings are expected to fall 47.5%, however, to $1.60 from $3.05 last year.

Cleveland-Cliffs is one of Jeremy’s favorite steel stocks.

Should Cleveland-Cliffs also be on your short list?

5. Wingstop Inc. (WING)

Wingstop operates 1950 locations worldwide. How did a restaurant chain get into a podcast about commodities? Chicken wings. The price of chicken wings has come down from 2022 highs, which is boosting Wingstop’s margins.

Shares of Wingstop are up 24.7% year-to-date. It’s not cheap, with a forward P/E of 91. Jeremy believes it can grow into the valuation, however.

Wingstop does pay a dividend, currently yielding 0.4%.

Is Wingstop a hidden commodities stock in 2023?

What Else do you Need to Know About Commodities in 2023?

Listen to this week’s podcast to find out.

Why Haven’t You Looked at Zacks' Top Stocks?

Since 2000, our top stock-picking strategies have blown away the S&P's +6.2 average gain per year. Amazingly, they soared with average gains of +46.4%, +49.5% and +55.2% per year. Today you can access their live picks without cost or obligation.

See Stocks Free >>

Media Contact

Zacks Investment Research

800-767-3771 ext. 9339

support@zacks.com

https://www.zacks.com/performance

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Freeport-McMoRan Inc. (FCX) : Free Stock Analysis Report

Cleveland-Cliffs Inc. (CLF) : Free Stock Analysis Report

Southern Copper Corporation (SCCO) : Free Stock Analysis Report

Cheniere Energy, Inc. (LNG) : Free Stock Analysis Report

Wingstop Inc. (WING) : Free Stock Analysis Report

Air Products and Chemicals, Inc. (APD) : Free Stock Analysis Report

Southern Copper Corporation SCCO is likely to register a year-over-year decline in earnings in its fourth-quarter 2022 results next week. Lower production levels, and a drop in copper and silver prices, as well as inflated costs, are expected to have weighed on the performance.

Q3 Results

In the last reported quarter, the company’s earnings and sales declined year over year. While revenues missed the Zacks Consensus Estimate, earnings beat the same. Over the past four quarters, SCCO surpassed earnings estimates in two quarters and missed in the other two, resulting in a negative average surprise of 5.45%.

Q4 Estimates

The Zacks Consensus Estimate for SCCO’s fourth-quarter 2022 earnings per share is pegged at 82 cents, indicating a decline of 24% from the prior-year quarter’s reported figure. The estimate has moved up 4% over the past 30 days. The consensus mark for the quarter’s revenues stands at $2.53 billion, suggesting a year-over-year decline of 10.5%.

Southern Copper Corporation Price and EPS Surprise

Southern Copper Corporation price-eps-surprise | Southern Copper Corporation Quote

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for Southern Copper this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. You can see the complete list of today’s Zacks #1 Rank stocks here.Earnings ESP: The Earnings ESP for Southern Copper is -1.83%. You can uncover the best stocks before they’re reported with our Earnings ESP Filter.Zacks Rank: Southern Copper currently sports a Zacks Rank of 1.

Key Factors

Copper accounts for more than 80% of the company’s sales. Over the past few quarters, SCCO has been witnessing lower production at its Peruvian mines due to lower ore grades. This trend is expected to have continued in 2022 and the fourth quarter was not an exception. Copper prices were on a downtrend throughout the fourth quarter, weighed down by uncertainties surrounding the global economy as new coronavirus restrictions in China affected the demand for the red metal, thus hurting prices. Prices were also impacted by the spike in energy costs and low global inventories.Silver prices have also been negatively impacted this year, weighed down by the stronger U.S. dollar, rising interest rates and sluggish growth. SCCO has also been facing higher costs for diesel and fuel, operating and repair materials, supplies, and energy, as well as higher labor costs.Overall, lower production levels, lower copper and silver prices, as well as elevated costs are expected to reflect on the company’s earnings in the to-be-reported quarter. Savings from the company’s stringent cost-control measures are likely to have negated some of the impacts.

Share Price Performance

Zacks Investment Research

Image Source: Zacks Investment Research

The company’s shares have gained 16.7% over the past year compared with the industry’s 37.1% growth.

Stocks to Consider

Here are some Basic Materials stocks, which, according to, our model, have the right combination of elements to post an earnings beat in their upcoming releases.Air Products and Chemicals APD, scheduled to release fourth quarter 2022 earnings on Feb 2, has an Earnings ESP of +2.67% and currently carries a Zacks Rank of 2.The Zacks Consensus Estimate for Air Products’ fourth-quarter earnings has been revised 0.4% upward in the past 60 days. The consensus estimate for APD’s earnings for the fourth quarter is pegged at $2.73.Teck Resources TECK, expected to release fourth-quarter earnings on Feb 23, has an Earnings ESP of +3.48%.The Zacks Consensus Estimate for Teck’s fourth-quarter earnings is pegged at 94 cents. TECK currently carries a Zacks Rank of 2.Albemarle ALB, scheduled to release fourth-quarter 2022 earnings on Feb 15, has an Earnings ESP of +7.16% and a Zacks Rank of 3.The Zacks Consensus Estimate for ALB’s fourth-quarter earnings has moved north 3% in the past 60 days. The consensus mark is pegged at $7.89.Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Albemarle Corporation (ALB) : Free Stock Analysis Report

Southern Copper Corporation (SCCO) : Free Stock Analysis Report

Teck Resources Ltd (TECK) : Free Stock Analysis Report

Southern Copper Corporation (SCCO) : Free Stock Analysis Report

Considering Southern Copper has not realized below-30% volatility over a 50-day period in the last two years, these options appear cheap.

Southern Copper (SCCO) is one of the stocks most watched by Zacks.com visitors lately. So, it might be a good idea to review some of the factors that might affect the near-term performance of the stock.

Shares of this miner have returned +23.4% over the past month versus the Zacks S&P 500 composite’s +4.6% change. The Zacks Mining – Non Ferrous industry, to which Southern Copper belongs, has gained 20.4% over this period. Now the key question is: Where could the stock be headed in the near term?

While media releases or rumors about a substantial change in a company’s business prospects usually make its stock ‘trending’ and lead to an immediate price change, there are always some fundamental facts that eventually dominate the buy-and-hold decision-making.

Earnings Estimate Revisions

Here at Zacks, we prioritize appraising the change in the projection of a company’s future earnings over anything else. That’s because we believe the present value of its future stream of earnings is what determines the fair value for its stock.

We essentially look at how sell-side analysts covering the stock are revising their earnings estimates to reflect the impact of the latest business trends. And if earnings estimates go up for a company, the fair value for its stock goes up. A higher fair value than the current market price drives investors’ interest in buying the stock, leading to its price moving higher. This is why empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements.

Southern Copper is expected to post earnings of $0.82 per share for the current quarter, representing a year-over-year change of -24.1%. Over the last 30 days, the Zacks Consensus Estimate has changed -1.5%.

The consensus earnings estimate of $3.07 for the current fiscal year indicates a year-over-year change of -30.1%. This estimate has changed +6.6% over the last 30 days.

For the next fiscal year, the consensus earnings estimate of $3.24 indicates a change of +5.8% from what Southern Copper is expected to report a year ago. Over the past month, the estimate has changed +6.6%.

Having a strong externally audited track record, our proprietary stock rating tool, the Zacks Rank, offers a more conclusive picture of a stock’s price direction in the near term, since it effectively harnesses the power of earnings estimate revisions. Due to the size of the recent change in the consensus estimate, along with three other factors related to earnings estimates, Southern Copper is rated Zacks Rank #1 (Strong Buy).

The chart below shows the evolution of the company’s forward 12-month consensus EPS estimate:

12 Month EPS

12-month consensus EPS estimate for SCCO _12MonthEPSChartUrl

Projected Revenue Growth

Even though a company’s earnings growth is arguably the best indicator of its financial health, nothing much happens if it cannot raise its revenues. It’s almost impossible for a company to grow its earnings without growing its revenue for long periods. Therefore, knowing a company’s potential revenue growth is crucial.

For Southern Copper, the consensus sales estimate for the current quarter of $2.53 billion indicates a year-over-year change of -10.5%. For the current and next fiscal years, $9.76 billion and $9.44 billion estimates indicate -10.8% and -3.3% changes, respectively.

Last Reported Results and Surprise History

Southern Copper reported revenues of $2.16 billion in the last reported quarter, representing a year-over-year change of -19.6%. EPS of $0.67 for the same period compares with $1.12 a year ago.

Compared to the Zacks Consensus Estimate of $2.32 billion, the reported revenues represent a surprise of -6.96%. The EPS surprise was +21.82%.

Over the last four quarters, Southern Copper surpassed consensus EPS estimates two times. The company topped consensus revenue estimates two times over this period.

Valuation

Without considering a stock’s valuation, no investment decision can be efficient. In predicting a stock’s future price performance, it’s crucial to determine whether its current price correctly reflects the intrinsic value of the underlying business and the company’s growth prospects.

While comparing the current values of a company’s valuation multiples, such as price-to-earnings (P/E), price-to-sales (P/S) and price-to-cash flow (P/CF), with its own historical values helps determine whether its stock is fairly valued, overvalued, or undervalued, comparing the company relative to its peers on these parameters gives a good sense of the reasonability of the stock’s price.

The Zacks Value Style Score (part of the Zacks Style Scores system), which pays close attention to both traditional and unconventional valuation metrics to grade stocks from A to F (an An is better than a B; a B is better than a C; and so on), is pretty helpful in identifying whether a stock is overvalued, rightly valued, or temporarily undervalued.

Southern Copper is graded D on this front, indicating that it is trading at a premium to its peers. Click here to see the values of some of the valuation metrics that have driven this grade.

Bottom Line

The facts discussed here and much other information on Zacks.com might help determine whether or not it’s worthwhile paying attention to the market buzz about Southern Copper. However, its Zacks Rank #1 does suggest that it may outperform the broader market in the near term.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Southern Copper Corporation (SCCO) : Free Stock Analysis Report

Wall Street expects a year-over-year decline in earnings on lower revenues when Southern Copper (SCCO) reports results for the quarter ended December 2022. While this widely-known consensus outlook is important in gauging the company's earnings picture, a powerful factor that could impact its near-term stock price is how the actual results compare to these estimates.

The earnings report might help the stock move higher if these key numbers are better than expectations. On the other hand, if they miss, the stock may move lower.

While the sustainability of the immediate price change and future earnings expectations will mostly depend on management's discussion of business conditions on the earnings call, it's worth handicapping the probability of a positive EPS surprise.

Zacks Consensus Estimate

This miner is expected to post quarterly earnings of $0.82 per share in its upcoming report, which represents a year-over-year change of -24.1%.

Revenues are expected to be $2.53 billion, down 10.5% from the year-ago quarter.

Estimate Revisions Trend

The consensus EPS estimate for the quarter has been revised 1.47% lower over the last 30 days to the current level. This is essentially a reflection of how the covering analysts have collectively reassessed their initial estimates over this period.

Investors should keep in mind that the direction of estimate revisions by each of the covering analysts may not always get reflected in the aggregate change.

Earnings Whisper

Estimate revisions ahead of a company's earnings release offer clues to the business conditions for the period whose results are coming out. Our proprietary surprise prediction model — the Zacks Earnings ESP (Expected Surprise Prediction) — has this insight at its core.

The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter; the Most Accurate Estimate is a more recent version of the Zacks Consensus EPS estimate. The idea here is that analysts revising their estimates right before an earnings release have the latest information, which could potentially be more accurate than what they and others contributing to the consensus had predicted earlier.

Thus, a positive or negative Earnings ESP reading theoretically indicates the likely deviation of the actual earnings from the consensus estimate. However, the model's predictive power is significant for positive ESP readings only.

A positive Earnings ESP is a strong predictor of an earnings beat, particularly when combined with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). Our research shows that stocks with this combination produce a positive surprise nearly 70% of the time, and a solid Zacks Rank actually increases the predictive power of Earnings ESP.

Please note that a negative Earnings ESP reading is not indicative of an earnings miss. Our research shows that it is difficult to predict an earnings beat with any degree of confidence for stocks with negative Earnings ESP readings and/or Zacks Rank of 4 (Sell) or 5 (Strong Sell).

How Have the Numbers Shaped Up for Southern Copper?

For Southern Copper, the Most Accurate Estimate is lower than the Zacks Consensus Estimate, suggesting that analysts have recently become bearish on the company's earnings prospects. This has resulted in an Earnings ESP of -1.83%.

On the other hand, the stock currently carries a Zacks Rank of #1.

So, this combination makes it difficult to conclusively predict that Southern Copper will beat the consensus EPS estimate.

Does Earnings Surprise History Hold Any Clue?

While calculating estimates for a company's future earnings, analysts often consider to what extent it has been able to match past consensus estimates. So, it's worth taking a look at the surprise history for gauging its influence on the upcoming number.

For the last reported quarter, it was expected that Southern Copper would post earnings of $0.55 per share when it actually produced earnings of $0.67, delivering a surprise of +21.82%.

Over the last four quarters, the company has beaten consensus EPS estimates two times.

Bottom Line

An earnings beat or miss may not be the sole basis for a stock moving higher or lower. Many stocks end up losing ground despite an earnings beat due to other factors that disappoint investors. Similarly, unforeseen catalysts help a number of stocks gain despite an earnings miss.

That said, betting on stocks that are expected to beat earnings expectations does increase the odds of success. This is why it's worth checking a company's Earnings ESP and Zacks Rank ahead of its quarterly release. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they've reported.

Southern Copper doesn't appear a compelling earnings-beat candidate. However, investors should pay attention to other factors too for betting on this stock or staying away from it ahead of its earnings release.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Here are 3 companies under heavy accumulation this year.

Southern Copper Corp. (SCCO) Analysis

First is Southern Copper Corp. (SCCO) which develops and produces materials including copper, silver, and zinc. The stock is up a staggering 24% in 2023, but more impressive is its 60% climb the last 3 months.

Healthy institutional accumulation has likely helped lift the shares higher, which you can see below. Since November there’ve been 13 unusually large volume inflows (green bars):

Source: www.mapsignals.com

With a 12-month forward P/E of 23.2, shares could be attractive after a pullback. Additionally, a 4.6% dividend yield makes the shares attractive.

One thing is for sure, the shares have been in demand lately.

Steel Dynamics Inc. (STLD) Analysis

Next up is Steel Dynamics (STLD) which is a large manufacturer and metal recycler. At MAPsignals, we believe in following large institutional flows. With the stock gaining 10% in 2023, we believe healthy accumulation is part of the story.

Since October there’ve been 10 days where the stock jumped in price alongside outsized volumes. That can mean there’s institutional interest:

Source: www.mapsignals.com

The 12-month forward P/E is pegged at 9.5X according to FactSet. The shares pay a decent 1.3% dividend yield.

This trading action suggests investors are expecting upside for the company in 2023.

Commercial Metals Co. (CMC) Analysis

The number 3 materials firm racing higher this year is Commercial Metals Co. (CMC). This company manufactures and recycles steel and metal products. The market cap is just over $6 billion.

The stock has been an outperformer recently, jumping 7% in 2023. Notably, the shares have seen 8 large inflow signals since October:

Source: www.mapsignals.com

There’s no question the stock could be extended at these levels. However, this is one of the most in-demand materials stocks according to MAPsignals research.

Strong sector leadership could mean there’s more upside for the group in 2023.

Bottom Line

SCCO, STLD, & CMC represent 3 of the top performing materials stocks so far in 2023. Healthy institutional accumulation signals make these stocks worthy of extra attention.

To learn more about MAPsignals’ institutional process please visit: www.mapsignals.com

Disclosure: As of the time of this writing, the author holds no positions in SCCO, STLD or CMC at the time of this writing.

This article was originally posted on FX Empire

More From FXEMPIRE:

To find a multi-bagger stock, what are the underlying trends we should look for in a business? One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. If you see this, it typically means it’s a company with a great business model and plenty of profitable reinvestment opportunities. With that in mind, the ROCE of Southern Copper (NYSE:SCCO) looks great, so lets see what the trend can tell us.

Return On Capital Employed (ROCE): What Is It?

If you haven’t worked with ROCE before, it measures the ‘return’ (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on Southern Copper is:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets – Current Liabilities)

0.29 = US$4.6b ÷ (US$17b – US$1.5b) (Based on the trailing twelve months to September 2022).

Thus, Southern Copper has an ROCE of 29%. In absolute terms that’s a great return and it’s even better than the Metals and Mining industry average of 18%.

Rio Tinto PLC (RIO) : Free Stock Analysis Report

roce

Above you can see how the current ROCE for Southern Copper compares to its prior returns on capital, but there’s only so much you can tell from the past. If you’d like to see what analysts are forecasting going forward, you should check out our free report for Southern Copper.

What The Trend Of ROCE Can Tell Us

Southern Copper’s ROCE growth is quite impressive. Looking at the data, we can see that even though capital employed in the business has remained relatively flat, the ROCE generated has risen by 70% over the last five years. So our take on this is that the business has increased efficiencies to generate these higher returns, all the while not needing to make any additional investments. On that front, things are looking good so it’s worth exploring what management has said about growth plans going forward.

In Conclusion…

To bring it all together, Southern Copper has done well to increase the returns it’s generating from its capital employed. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 96% return over the last five years. So given the stock has proven it has promising trends, it’s worth researching the company further to see if these trends are likely to persist.

If you want to know some of the risks facing Southern Copper we’ve found 2 warning signs (1 can’t be ignored!) that you should be aware of before investing here.

If you’d like to see other companies earning high returns, check out our free list of companies earning high returns with solid balance sheets here.

The Basic Materials group has plenty of great stocks, but investors should always be looking for companies that are outperforming their peers. Rio Tinto (RIO) is a stock that can certainly grab the attention of many investors, but do its recent returns compare favorably to the sector as a whole? Let's take a closer look at the stock's year-to-date performance to find out.

Rio Tinto is one of 239 individual stocks in the Basic Materials sector. Collectively, these companies sit at #2 in the Zacks Sector Rank. The Zacks Sector Rank considers 16 different groups, measuring the average Zacks Rank of the individual stocks within the sector to gauge the strength of each group.

The Zacks Rank is a successful stock-picking model that emphasizes earnings estimates and estimate revisions. The system highlights a number of different stocks that could be poised to outperform the broader market over the next one to three months. Rio Tinto is currently sporting a Zacks Rank of #2 (Buy).

Over the past 90 days, the Zacks Consensus Estimate for RIO's full-year earnings has moved 1% higher. This signals that analyst sentiment is improving and the stock's earnings outlook is more positive.

Based on the most recent data, RIO has returned 6.7% so far this year. At the same time, Basic Materials stocks have gained an average of 3.3%. As we can see, Rio Tinto is performing better than its sector in the calendar year.

Another stock in the Basic Materials sector, Southern Copper (SCCO), has outperformed the sector so far this year. The stock's year-to-date return is 24.9%.

The consensus estimate for Southern Copper's current year EPS has increased 12.4% over the past three months. The stock currently has a Zacks Rank #1 (Strong Buy).

To break things down more, Rio Tinto belongs to the Mining – Miscellaneous industry, a group that includes 49 individual companies and currently sits at #64 in the Zacks Industry Rank. Stocks in this group have gained about 9.4% so far this year, so RIO is slightly underperforming its industry this group in terms of year-to-date returns.

Southern Copper, however, belongs to the Mining – Non Ferrous industry. Currently, this 13-stock industry is ranked #149. The industry has moved +33.3% so far this year.

Investors with an interest in Basic Materials stocks should continue to track Rio Tinto and Southern Copper. These stocks will be looking to continue their solid performance.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Southern Copper Corporation (SCCO) : Free Stock Analysis Report

David Iben put it well when he said, ‘Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital.’ So it might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. As with many other companies Southern Copper Corporation (NYSE:SCCO) makes use of debt. But should shareholders be worried about its use of debt?

Why Does Debt Bring Risk?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. Ultimately, if the company can’t fulfill its legal obligations to repay debt, shareholders could walk away with nothing. However, a more usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. When we examine debt levels, we first consider both cash and debt levels, together.

Southern Copper Corporation (SCCO) : Free Stock Analysis Report

How Much Debt Does Southern Copper Carry?

The chart below, which you can click on for greater detail, shows that Southern Copper had US$6.55b in debt in September 2022; about the same as the year before. On the flip side, it has US$2.18b in cash leading to net debt of about US$4.37b.

debt-equity-history-analysisA Look At Southern Copper’s Liabilities

According to the last reported balance sheet, Southern Copper had liabilities of US$1.48b due within 12 months, and liabilities of US$7.97b due beyond 12 months. On the other hand, it had cash of US$2.18b and US$1.15b worth of receivables due within a year. So its liabilities total US$6.12b more than the combination of its cash and short-term receivables.

Of course, Southern Copper has a titanic market capitalization of US$59.6b, so these liabilities are probably manageable. However, we do think it is worth keeping an eye on its balance sheet strength, as it may change over time.

We measure a company’s debt load relative to its earnings power by looking at its net debt divided by its earnings before interest, tax, depreciation, and amortization (EBITDA) and by calculating how easily its earnings before interest and tax (EBIT) cover its interest expense (interest cover). This way, we consider both the absolute quantum of the debt, as well as the interest rates paid on it.

Southern Copper’s net debt is only 0.81 times its EBITDA. And its EBIT easily covers its interest expense, being 14.0 times the size. So we’re pretty relaxed about its super-conservative use of debt. But the bad news is that Southern Copper has seen its EBIT plunge 18% in the last twelve months. We think hat kind of performance, if repeated frequently, could well lead to difficulties for the stock. When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine Southern Copper’s ability to maintain a healthy balance sheet going forward. So if you’re focused on the future you can check out this free report showing analyst profit forecasts.

But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. So the logical step is to look at the proportion of that EBIT that is matched by actual free cash flow. Over the most recent three years, Southern Copper recorded free cash flow worth 55% of its EBIT, which is around normal, given free cash flow excludes interest and tax. This cold hard cash means it can reduce its debt when it wants to.

Our View

When it comes to the balance sheet, the standout positive for Southern Copper was the fact that it seems able to cover its interest expense with its EBIT confidently. But the other factors we noted above weren’t so encouraging. In particular, EBIT growth rate gives us cold feet. Considering this range of data points, we think Southern Copper is in a good position to manage its debt levels. But a word of caution: we think debt levels are high enough to justify ongoing monitoring. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. Case in point: We’ve spotted 2 warning signs for Southern Copper you should be aware of, and 1 of them is concerning.

If you’re interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.

Southern Copper (SCCO) has recently been on Zacks.com’s list of the most searched stocks. Therefore, you might want to consider some of the key factors that could influence the stock’s performance in the near future.

Shares of this miner have returned +26.4% over the past month versus the Zacks S&P 500 composite’s no change. The Zacks Mining – Non Ferrous industry, to which Southern Copper belongs, has gained 17.8% over this period. Now the key question is: Where could the stock be headed in the near term?

Revisions to Earnings Estimates

Southern Copper is expected to post earnings of $0.79 per share for the current quarter, representing a year-over-year change of -26.9%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.

For the current fiscal year, the consensus earnings estimate of $3.04 points to a change of -30.8% from the prior year. Over the last 30 days, this estimate has remained unchanged.

For the next fiscal year, the consensus earnings estimate of $3.04 indicates a change of +0.2% from what Southern Copper is expected to report a year ago. Over the past month, the estimate has remained unchanged.

The chart below shows the evolution of the company’s forward 12-month consensus EPS estimate:

12 Month EPS

12-month consensus EPS estimate for SCCO _12MonthEPSChartUrl

Revenue Growth Forecast

While earnings growth is arguably the most superior indicator of a company’s financial health, nothing happens as such if a business isn’t able to grow its revenues. After all, it’s nearly impossible for a company to increase its earnings for an extended period without increasing its revenues. So, it’s important to know a company’s potential revenue growth.

For Southern Copper, the consensus sales estimate for the current quarter of $2.48 billion indicates a year-over-year change of -12.2%. For the current and next fiscal years, $9.71 billion and $9.44 billion estimates indicate -11.2% and -2.8% changes, respectively.

Last Reported Results and Surprise History

Southern Copper reported revenues of $2.16 billion in the last reported quarter, representing a year-over-year change of -19.6%. EPS of $0.67 for the same period compares with $1.12 a year ago.

Compared to the Zacks Consensus Estimate of $2.32 billion, the reported revenues represent a surprise of -6.96%. The EPS surprise was +21.82%.

Over the last four quarters, Southern Copper surpassed consensus EPS estimates two times. The company topped consensus revenue estimates two times over this period.

Valuation

Comparing the current value of a company’s valuation multiples, such as its price-to-earnings (P/E), price-to-sales (P/S), and price-to-cash flow (P/CF), to its own historical values helps ascertain whether its stock is fairly valued, overvalued, or undervalued, whereas comparing the company relative to its peers on these parameters gives a good sense of how reasonable its stock price is.

As part of the Zacks Style Scores system, the Zacks Value Style Score (which evaluates both traditional and unconventional valuation metrics) organizes stocks into five groups ranging from A to F (A is better than B; B is better than C; and so on), making it helpful in identifying whether a stock is overvalued, rightly valued, or temporarily undervalued.

Southern Copper is graded F on this front, indicating that it is trading at a premium to its peers. Click here to see the values of some of the valuation metrics that have driven this grade.

Bottom Line

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

By buying an index fund, investors can approximate the average market return. But if you pick the right individual stocks, you could make more than that. Just take a look at Southern Copper Corporation (NYSE:SCCO), which is up 69%, over three years, soundly beating the market return of 17% (not including dividends). On the other hand, the returns haven’t been quite so good recently, with shareholders up just 15% , including dividends .

Since the stock has added US$6.7b to its market cap in the past week alone, let’s see if underlying performance has been driving long-term returns.

Commercial Metals Company (CMC) : Free Stock Analysis Report

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During three years of share price growth, Southern Copper achieved compound earnings per share growth of 20% per year. We note that the 19% yearly (average) share price gain isn’t too far from the EPS growth rate. Coincidence? Probably not. This suggests that sentiment and expectations have not changed drastically. Quite to the contrary, the share price has arguably reflected the EPS growth.

The company’s earnings per share (over time) is depicted in the image below (click to see the exact numbers).

earnings-per-share-growth

It’s probably worth noting that the CEO is paid less than the median at similar sized companies. It’s always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. Dive deeper into the earnings by checking this interactive graph of Southern Copper’s earnings, revenue and cash flow.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Southern Copper, it has a TSR of 96% for the last 3 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

It’s nice to see that Southern Copper shareholders have received a total shareholder return of 15% over the last year. Of course, that includes the dividend. That gain is better than the annual TSR over five years, which is 13%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We’ve identified 2 warning signs with Southern Copper (at least 1 which is a bit concerning) , and understanding them should be part of your investment process.

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

Copper prices hit their highest level since mid-2022 on expectations that China’s reopening will boost demand for industrial metals. The rally in copper, which on Wednesday traded above $9,000 a metric ton on the London Metal Exchange for the first time since June, is broadly a good sign for the global economy. Copper is used in construction, cars, machinery, consumer goods and energy infrastructure. Prices typically rise when demand picks up speed in line with economic growth. China is by far t

For those looking to find strong Basic Materials stocks, it is prudent to search for companies in the group that are outperforming their peers. Is Commercial Metals (CMC) one of those stocks right now? By taking a look at the stock's year-to-date performance in comparison to its Basic Materials peers, we might be able to answer that question.

Commercial Metals is one of 242 companies in the Basic Materials group. The Basic Materials group currently sits at #7 within the Zacks Sector Rank. The Zacks Sector Rank considers 16 different groups, measuring the average Zacks Rank of the individual stocks within the sector to gauge the strength of each group.

The Zacks Rank is a proven system that emphasizes earnings estimates and estimate revisions, highlighting a variety of stocks that are displaying the right characteristics to beat the market over the next one to three months. Commercial Metals is currently sporting a Zacks Rank of #1 (Strong Buy).

Over the past three months, the Zacks Consensus Estimate for CMC's full-year earnings has moved 13.8% higher. This shows that analyst sentiment has improved and the company's earnings outlook is stronger.

Based on the most recent data, CMC has returned 36.1% so far this year. Meanwhile, the Basic Materials sector has returned an average of -2.7% on a year-to-date basis. As we can see, Commercial Metals is performing better than its sector in the calendar year.

Another Basic Materials stock, which has outperformed the sector so far this year, is Southern Copper (SCCO). The stock has returned 0.8% year-to-date.

In Southern Copper's case, the consensus EPS estimate for the current year increased 5.4% over the past three months. The stock currently has a Zacks Rank #2 (Buy).

Breaking things down more, Commercial Metals is a member of the Steel – Producers industry, which includes 24 individual companies and currently sits at #30 in the Zacks Industry Rank. On average, stocks in this group have gained 2.6% this year, meaning that CMC is performing better in terms of year-to-date returns.

In contrast, Southern Copper falls under the Mining – Non Ferrous industry. Currently, this industry has 13 stocks and is ranked #95. Since the beginning of the year, the industry has moved +16.7%.

Commercial Metals and Southern Copper could continue their solid performance, so investors interested in Basic Materials stocks should continue to pay close attention to these stocks.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Southern Copper Corporation (SCCO) : Free Stock Analysis Report

See our latest analysis for Southern Copper

If you’re not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. Amongst other things, we’ll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company’s amount of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. So when we looked at the ROCE trend of Southern Copper (NYSE:SCCO) we really liked what we saw.

Understanding Return On Capital Employed (ROCE)

For those that aren’t sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. The formula for this calculation on Southern Copper is:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets – Current Liabilities)

0.29 = US$4.6b ÷ (US$17b – US$1.5b) (Based on the trailing twelve months to September 2022).

So, Southern Copper has an ROCE of 29%. That’s a fantastic return and not only that, it outpaces the average of 18% earned by companies in a similar industry.

roce

What Can We Tell From Southern Copper’s ROCE Trend?

Southern Copper is showing promise given that its ROCE is trending up and to the right. Looking at the data, we can see that even though capital employed in the business has remained relatively flat, the ROCE generated has risen by 70% over the last five years. So our take on this is that the business has increased efficiencies to generate these higher returns, all the while not needing to make any additional investments. It’s worth looking deeper into this though because while it’s great that the business is more efficient, it might also mean that going forward the areas to invest internally for the organic growth are lacking.

In Conclusion…

To bring it all together, Southern Copper has done well to increase the returns it’s generating from its capital employed. And with a respectable 63% awarded to those who held the stock over the last five years, you could argue that these developments are starting to get the attention they deserve. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

If you want to know some of the risks facing Southern Copper we’ve found 2 warning signs (1 is a bit unpleasant!) that you should be aware of before investing here.

If you’d like to see other companies earning high returns, check out our free list of companies earning high returns with solid balance sheets here.

Wall Street is heading toward completing a terrible 2022. U.S. stock markets have seen a broad-based decline this year. Among the 11 broad sectors on the market’s benchmark — the S&P 500 Index — all except energy are in the red year to date.

Even the massive growth of the energy sector is primarily due to its low base in the pandemic-ridden last two years, the unending war between Russia and Ukraine and strict production control by OPEC.

Concerns About a Recession in 2023

On Dec 14, the Fed increased interest rates by another 50 basis points. The Fed indicated a continued increase in interest rates at regular intervals through 2023. The latest interest rate hike took the benchmark range to 4.25% to 4.50%, and the Fed projected it to top out at 5.25% before it takes a call on pausing the hikes. This is higher than the September forecast of 4.75%.

Recession fears were further ignited after central banks in Europe also hinted at hiking interest rates through 2023. Both the Bank of England and the European Central Bank slowed down their pace of rate hikes but increased interest rates by 50 basis points. Investors were once again alarmed by this as they believe that the ongoing rate increases could push the economy into a recession.

On Dec 20, global financial markets were completely surprised as the Bank of Japan suddenly widened its target range for the 10-year Japanese government bond yields. The Bank of Japan raised the yield curve control range to 0.5% from the current level of 0.25%, around its target level of 0% yield.

This has sparked widespread selling of bonds and stocks across the global financial markets as the Japanese central bank’s move was perceived by market participants as potentially hawkish. BOJ has so far maintained a 0% benchmark interest rate.

U.S. Stock Markets Seem Oversold

Year to date, the three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — have tumbled 9.6%, 19.8% and 32.6%. On Dec 19, these three stock indexes closed at their lowest levels in five weeks.

However, peak inflation seems behind us. A less-than-expected inflation rate in October and November with respect to several measures have clearly indicated this. In fact, economic indicators like a tepid housing sector, declining commodity prices (except food and energy), growing accumulation of inventories on the part of manufacturers and retailers, a gradual slowdown of the ISM manufacturing PMI and retail sales along with a decline in the job openings rate are all pointing to the cooling down of the U.S. economy.

Our Top Picks

At this stage, it will be prudent to invest in beaten down U.S. corporate giants (market capital > $30 billion) for 2022 that have solid potential for 2023. We have selected five such stocks with a favorable Zacks Rank.

These companies have stable business model and stocks are currently available at attractive valuations. Each of our picks carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The chart below shows the price performance of our five picks year to date.

Zacks Investment Research

Image Source: Zacks Investment Research

Fortinet Inc. FTNT is benefiting from rising demand for security and networking products amid the coronavirus crisis as a huge global workforce is working remotely. FTNT is also benefiting from robust growth in Fortinet Security Fabric, cloud and Software-defined Wide Area Network offerings.

Moreover, continued deal wins, especially those of high value, are solid drivers. Higher IT spending on cybersecurity is expected to aid Fortinet in growing faster than the security market. Also, focus on enhancing its unified threat management portfolio through product development and acquisitions is a tailwind for FTNT.

Fortinet has an expected earnings growth rate of 20.6% for next year. The Zacks Consensus Estimate for next-year earnings improved 6.2% over the last 60 days. The stock price of FTNT is currently trading at a 32.1% discount from its 52-week high.

salesforce.com inc. CRM is benefiting from a robust demand environment as customers are undergoing a major digital transformation. The rapid adoption of its cloud-based solutions is driving demand for CRM’s products. CRM’s sustained focus on introducing more aligned products as per customer needs is driving its top-line.

Continued deal wins in the international market are other growth drivers. The acquisition of Slack would position salesforce.com to be a leader in the enterprise team collaboration solution space and better compete with Microsoft’s Teams product. We expect CRM revenues to witness a CAGR of 12.5% through fiscal 2023-2025.

salesforce.com has an expected earnings growth rate of 14.6% for next year (ending January 2024). The Zacks Consensus Estimate for next-year earnings improved 2% over the last 30 days. The stock price of CRM is currently trading at a 50.7% discount from its 52-week high.

Workday Inc.’s WDAY revenue growth continues to be driven by high demand for its HCM and financial management solutions. WDAY’s cloud-based business model and expanding product portfolio have been the primary growth drivers.

Moreover, the growing clout of Workday Prism Analytics and Adaptive Insights business planning cloud offerings holds promise. Based on its expanding product portfolio, we believe that Workday is well positioned to gain from its strong growth prospect.

Workday has an expected earnings growth rate of 32.3% for next year (ending January 2024). The Zacks Consensus Estimate for next-year earnings improved 0.2% over the last seven days. The stock price of WDAY is currently trading at a 38.7% discount from its 52-week high.

Wells Fargo & Co. WFC has benefited from rising rates and solid average loan growth. Progress on efficiency initiatives propelled expense control and savings, which might support WFC’s bottom line in the upcoming period. Strength in the deposit balance would aid the bank’s liquidity position. WFC’s solid liquidity position will help navigate economic uncertainty and supports capital deployment moves.

Wells Fargo has an expected earnings growth rate of 34.7% for next year. The Zacks Consensus Estimate for next-year earnings improved 0.2% over the last seven days. The stock price of WFC is currently trading at a 32% discount from its 52-week high.

Southern Copper Corp. SCCO expects production to recover in 2023 and reach 971,000 tons with Peruvian production coming back on track and new production at Pilares, El Pilar and Buenavista. SCCO’s strict cost control measures will help offset the impact of inflated fuel, labor and operating costs.

Even though copper prices have declined lately, SCCO will be supported by growth in public infrastructure investment in the United States and global initiatives to address climate change. This would support Southern Copper’s top-line performance. Backed by industry-leading copper reserves as well as growth investments, SCCO is well poised to continue delivering solid results.

Southern Copper has an expected earnings growth rate of 0.2% for next year. The Zacks Consensus Estimate for next-year earnings improved 20.2% over the last 30 days. The stock price of SCCO is currently trading at a 23.8% discount from its 52-week high.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Wells Fargo & Company (WFC) : Free Stock Analysis Report

Salesforce Inc. (CRM) : Free Stock Analysis Report

Southern Copper Corporation (SCCO) : Free Stock Analysis Report

Fortinet, Inc. (FTNT) : Free Stock Analysis Report

Workday, Inc. (WDAY) : Free Stock Analysis Report

By Marco Aquino and Marcelo Rochabrun

TAPAIRIHUA, Peru (Reuters) – In the hills of Tapairihua in Peru's Andes, Samuel Retamozo and other artisanal miners have found a rich seam of copper on their indigenous community's land. Armed with temporary government permits, they started exploiting it earlier this year.

There's just one problem – the seam is within the site of Southern Copper Corp's planned $2.6 billion Los Chancas mine. One of the world's biggest copper miners, it also has a permit to dig in the same area.

Grupo Mexico's Southern Copper aims to start producing here in 2027 after decades of studies. The planned mine is crucial to the company's goal of producing 1.8 million tonnes of copper annually by 2030.

But the rise of artisanal copper mining – driven by high global metal prices and sustained by a messy government permitting system – is threatening billions in new investments by Southern Copper and others in Peru, according to Reuters reviews of internal company reports, interviews with executives and a visit to Tapairihua to meet the miners.

Small-scale copper miners are now challenging Big Copper for territorial control of rich deposits of the red metal. Artisanal copper mining is creating much-needed income for impoverished Andean Peruvians even as it brings them into conflict with major miners, a rare and previously unreported trend in the world's No. 2 copper producer.

"This used to happen with silver and gold, but now it's affecting copper," said Raul Jacob, Southern Copper's chief financial officer, bemoaning what the company sees as the government's poor handling of artisanal mining permits.

In Peru, artisanal mining permits have doubled to 80,000 since 2020, government records show. And copper is the new focus.

Southern Copper is not the only mining company in a stand-off with the miners. Chinese-owned MMG Ltd's nearby Las Bambas copper mine is struggling to develop two new open pits because of artisanal miners who have settled on the same land. The company says its current pit is running out.

"Informal mining is entering lands granted to formal (mining) companies and threatening the development of large-scale projects," a source close to MMG told Reuters.

While companies often call small-scale miners "informal" or "illegal," what complicates the matter are two dueling authorizations – one for artisanal mining and another to hold the mining rights to a given area. Mining companies own the latter, known as concessions.

But since 2012 Peru has been granting artisanal mining permits on lands that overlap with concessions, giving the small-scale miners some legal protection, Reuters found after checking the geolocations of the permits and reviewing an internal document in which Peru's mining ministry did the same.

POTENTIAL FOR MORE DISPUTES

Disputes between mining firms and artisanal miners may only increase over time. Peru's leftist administration presented a new framework for artisanal mining last week that declared artisanal mining is "as important" as big mining.

Southern Copper has asked the government to revoke all artisanal mining permits on its concession. About half have now been canceled, causing resentment in Tapairihua.

"We are going to defend ourselves. At the end of the day we are at home, and from home there is nowhere to go," Retamozo, a mining engineer and president of the Tapairihua Mining Association, told Reuters.

While artisanal permits have existed since 2012, lower copper prices that decade meant they were not in demand. But copper has risen more than 60% since 2020 due to demand for electric vehicles.

The surge in artisanal copper mining is forcing the government to review its artisanal permitting system, a mechanism that was meant to be a temporary bridge toward formalization and intended mostly for gold miners.

"Our country is a mining country but we haven't had until now a mining framework that gives a long-term view about small-scale mining," Alberto Rojas, Peru's top mining formalization official, told Reuters

Rojas, however, suggested artisanal miners would lose in a dispute against concession holders.

"Where we have concessions we can't have (artisanal mining permits)," Rojas said. "We can't disavow the concessions that have already been granted."

DIGGERS, TRUCKS

On a recent day in Tapairihua, Reuters visited the artisanal mining operations, where dozens of wood and blue tarpaulin homes were erected, and tunnels supported with wooden beams burrowed into the steep rocky hillside.

In Peru's Andes many feel the copper under the ground is a right, with mining dating back to the Incas and other cultures that existed before Spain's colonization. Tapairihua looks down onto the river Antabamba, meaning "copper plain" in the Andean Quechua language.

Many of the miners are also local subsistence farmers who took up mining in search of income. Many declined to be named because they have been sued by Southern Copper over their mining activities.

To extract copper, they use dynamite to explode rock that they bring out in wheelbarrows and bags. Miners earn 80 soles ($20.61) a day, extracting enough rock to fill a handful of trucks a week, usually containing around 5% copper, though this level can rise as high as 18%.

Gherson Quintanilla arrived in Tapairihua earlier this year with a background in artisanal gold mining. He came because he heard copper was abundant and expertise was low.

"My goal is to extract up to two truckloads a day," he told Reuters.

But artisanal copper mining is not always as small scale.

Graphic: Las Bambas: Small-scale miners https://www.reuters.com/graphics/PERU-MINING/zjpqjkdbyvx/chart.png

An internal Las Bambas presentation seen by Reuters estimated informal miners were blasting some 1,950 tonnes of rock per day, almost double their output a year ago.

The report said artisanal miners were using heavy machinery and diggers as well as pneumatic tools.

Overall, it estimated the government has issued 700 permits that overlap with Las Bambas's concession,

But removing those miners is not straightforward. While Las Bambas and Southern Copper hold mining rights – which grants them access to the mineral underground – in most cases they have yet to buy the property rights to the surface terrain.

That limits their options because they cannot file an eviction claim on land they do not own.

The source close to Las Bambas said MMG recognized this difficulty and anticipated it would have to buy out the miners if it wants them to leave the site of its third pit, set to open in 2027 – if there are no delays.

At the site of its second pit, which was supposed to open this year, Las Bambas has filed eviction claims against the miners there because it already owns that particular parcel of land. The company estimates almost a dozen mining sites in the area. Reuters was unable to determine the number of miners working in them.

Graphic: Las Bambas: artisanal mining https://www.reuters.com/graphics/PERU-MINING/lbvggnmarvq/chart.png

'FUEL TO THE FIRE'

In May, Southern Copper sued Retamozo and other Tapairihua miners, saying their mining permits were non-compliant.

Weeks later a fire destroyed Southern Copper's local headquarters, which is made up of tents, just minutes downhill from where the small-scale miners are operating. Burned-out cars remain there today.

Nobody was hurt in the fire and no arrests have been made. Peruvian authorities say the matter remains under investigation.

The miners have distanced themselves from the arson, though Retamozo acknowledged the lawsuits have angered them and that some individual members may have acted out of "resentment."

The number of valid artisanal mining permits in Tapairihua has fallen from 100 to 32 since May, according to government records. An internal mining ministry document seen by Reuters shows that the process is under way to revoke the remaining permits.

Retamozo cautioned about what would happen if those were canceled.

"Canceling them would add fuel to the fire," he said.

($1 = 3.8811 soles)

(Reporting by Marco Aquino and Marcelo Rochabrun; Editing by Adam Jourdan and Ross Colvin)

By Marco Aquino and Marcelo Rochabrun

TAPAIRIHUA, Peru, Dec 1 (Reuters) – In the hills of Tapairihua in Peru's Andes, Samuel Retamozo and other artisanal miners have found a rich seam of copper on their indigenous community's land. Armed with temporary government permits, they started exploiting it earlier this year.

In Peru, artisanal mining permits have doubled to 80,000 since 2020, government records show. And copper is the new focus.

"Informal mining is entering lands granted to formal (mining) companies and threatening the development of large-scale projects," a source close to MMG told Reuters.

POTENTIAL FOR MORE DISPUTES

Southern Copper has asked the government to revoke all artisanal mining permits on its concession. About half have now been canceled, causing resentment in Tapairihua.

While artisanal permits have existed since 2012, lower copper prices that decade meant they were not in demand. But copper has risen more than 60% since 2020 due to demand for electric vehicles.

Rojas, however, suggested artisanal miners would lose in a dispute against concession holders.

"Where we have concessions we can't have (artisanal mining permits)," Rojas said. "We can't disavow the concessions that have already been granted."

DIGGERS, TRUCKS

Many of the miners are also local subsistence farmers who took up mining in search of income. Many declined to be named because they have been sued by Southern Copper over their mining activities.

Gherson Quintanilla arrived in Tapairihua earlier this year with a background in artisanal gold mining. He came because he heard copper was abundant and expertise was low.

"My goal is to extract up to two truckloads a day," he told Reuters.

But artisanal copper mining is not always as small scale.

An internal Las Bambas presentation seen by Reuters estimated informal miners were blasting some 1,950 tonnes of rock per day, almost double their output a year ago.

The report said artisanal miners were using heavy machinery and diggers as well as pneumatic tools.

Overall, it estimated the government has issued 700 permits that overlap with Las Bambas's concession,

That limits their options because they cannot file an eviction claim on land they do not own.

'FUEL TO THE FIRE'

In May, Southern Copper sued Retamozo and other Tapairihua miners, saying their mining permits were non-compliant.

Nobody was hurt in the fire and no arrests have been made. Peruvian authorities say the matter remains under investigation.

The miners have distanced themselves from the arson, though Retamozo acknowledged the lawsuits have angered them and that some individual members may have acted out of "resentment."

Retamozo cautioned about what would happen if those were canceled.

"Canceling them would add fuel to the fire," he said. ($1 = 3.8811 soles)

(Reporting by Marco Aquino and Marcelo Rochabrun; Editing by Adam Jourdan and Ross Colvin)

By buying an index fund, you can roughly match the market return with ease. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. For example, Southern Copper Corporation (NYSE:SCCO) shareholders have seen the share price rise 53% over three years, well in excess of the market return (25%, not including dividends). However, more recent returns haven’t been as impressive as that, with the stock returning just 3.6% in the last year , including dividends .

In light of the stock dropping 3.9% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company’s positive three-year return.

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During three years of share price growth, Southern Copper achieved compound earnings per share growth of 20% per year. The average annual share price increase of 15% is actually lower than the EPS growth. So one could reasonably conclude that the market has cooled on the stock.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

earnings-per-share-growth

We’re pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. It might be well worthwhile taking a look at our free report on Southern Copper’s earnings, revenue and cash flow.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Southern Copper’s TSR for the last 3 years was 77%, which exceeds the share price return mentioned earlier. And there’s no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It’s good to see that Southern Copper has rewarded shareholders with a total shareholder return of 3.6% in the last twelve months. And that does include the dividend. However, the TSR over five years, coming in at 11% per year, is even more impressive. Potential buyers might understandably feel they’ve missed the opportunity, but it’s always possible business is still firing on all cylinders. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Case in point: We’ve spotted 2 warning signs for Southern Copper you should be aware of, and 1 of them makes us a bit uncomfortable.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

Southern Copper Corporation (NYSE:SCCO) has announced that on 23rd of November, it will be paying a dividend of$0.50, which a reduction from last year’s comparable dividend. However, the dividend yield of 6.2% is still a decent boost to shareholder returns.