Tuesday, Scotiabank adjusted its outlook on Southern Copper (NYSE:SCCO), reducing the price target to $54 from $55, while maintaining a Sector Underperform rating. The firm's analysis indicates an increase in the company's projected earnings before interest, taxes, depreciation, and amortization (EBITDA) for the years 2024 through 2026.
The revisions reflect an 8% rise for 2024, bringing the EBITDA estimate to $5.9 billion, and smaller increments for the subsequent years, with estimates reaching $6.9 billion and $8.0 billion for 2025 and 2026, respectively.
The revised financial outlook is based on higher expected production volumes and reduced operational costs. However, the capital expenditure (capex) forecasts for Southern Copper have also been adjusted upward. The new capex estimates stand at $767 million for 2024, which is an increase of 12% from previous estimates. For 2025 and 2026, the capex is projected to be $638 million and $653 million, marking an 11% and 15% increase over prior estimates, accordingly.
Despite the improved EBITDA and capex projections, Scotiabank's one-year target price for Southern Copper's shares has been lowered. The decrease to $54 from the former target of $55 is attributed to the updated financial estimates and the current market assessment of the company's stock.
Southern Copper, known for its copper production and related activities, is navigating a market where operational efficiency and cost management are crucial. The adjustments in the financial estimates by Scotiabank reflect the latest data on the company's expected performance in the coming years. Investors and market watchers will likely monitor Southern Copper's progress against these forecasts.
InvestingPro Insights
As Scotiabank revises its financial outlook on Southern Copper (NYSE:SCCO), real-time data from InvestingPro provides additional context for investors. Southern Copper's market capitalization stands at a robust $100.97 billion, showcasing the company's significant presence in the market. Despite trading at a high earnings multiple with a P/E ratio of 43.11, the company's cash flows are strong enough to sufficiently cover interest payments, a positive sign for financial stability. Additionally, Southern Copper's commitment to shareholder value is evident through its impressive track record of maintaining dividend payments for 29 consecutive years.
InvestingPro Tips highlight that Southern Copper has raised its dividend for three consecutive years, suggesting a reliable income stream for investors. Moreover, the company operates with a moderate level of debt, which may provide some comfort to investors concerned about financial leverage. For those seeking more insights, InvestingPro offers additional tips for Southern Copper, including an analysis of the company's high return over the last year and its liquidity position, with liquid assets exceeding short-term obligations. To gain access to these insights and more, interested readers can explore Southern Copper on InvestingPro and use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. There are over 16 additional InvestingPro Tips available that can help investors make more informed decisions.
Investors may also note the company's performance metrics, such as a 1-year price total return of 96.48%, indicating strong recent growth. With the next earnings date on July 23, 2024, market participants will be watching to see if Southern Copper can sustain its performance and meet the revised EBITDA estimates presented by Scotiabank.
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