Souther Copper Corp. - Momentum

Southern Copper Corp. (SCCO) is worth its weight in copper, fresh off a new all-time high above $50 as copper prices continue to surge. With a bullish next-year estimate and attractive valuation, this Zacks #1 rank stock is more than change in momentum’s pocket.

Company Description

Southern Copper Corp. is one of the world’s largest copper companies, with operations in Peru, Mexico and Chile and a market cap of $44 billion. The company has been in business since 1952 and is based out of Phoenix, AZ.

With copper prices reaching for the sky, it doesn’t take a genius to figure out copper companies should be killing it. That was on display in late October when Southern Copper reported another strong quarter.

Third-Quarter Results

Revenue for the period was up 10% from last year to $1.28 billion. Although earnings fell 5 cents short of the Zacks Consensus Estimate, income was still up 17% from last year.

The good quarter was driven by a simple combination of higher prices and increased production, up 4.1% from last year to 125,193 million tons.

Looking forward, SCCO has some hedges in place to temper volatility, but with more than 85% of the company’s total 2011 production tied to cash prices, higher copper prices will hit the bottom line.

Financial Profile

Southern Copper will also benefit from a strong financial profile, with more than $2.2 billion in cash and equivalents on the balance sheet. Its total debt load of $2.7 billion in light of its valuation and asset base.

Estimates

We’ve seen some weakness in the current-year estimate over the last few months on some special charges, but the next-year estimate is up nicely to $3.21, a bullish 80% growth projection.

Valuation

Although SCCO does trade at a premium to its peers, its PEG ratio of .18 is well below the value benchmark of 1.

10-Year Chart

Take a look at the great chart below. Higher copper prices have pushed shares of SCCO to a new all-time high. Look for support from the long-term trend line on any weakness.