Analyzing Southern Copper’s Risk Factors

Southern Copper (SCCO) is a mining company with operations in Mexico, Peru, Argentina, Ecuador, and Chile. It is one of the world’s largest copper producers. In addition to copper, the company produces other metals and minerals such as zinc, lead, silver, and molybdenum.

For Q4 2021, Southern Copper reported a 20.1% year-over-year rise in revenue to $2.8 billion. It posted EPS of $1.08, which rose from $0.76 in the same quarter the previous year.

The company recently paid a quarterly dividend of $1 per share. Southern Copper stock currently offers a dividend yield of 4.84%, compared to the sector average of 1.54%.

With this in mind, we used TipRanks to take a look at the risk factors for Southern Copper.

Risk Factors 

According to the new TipRanks Risk Factors tool, Southern Copper’s top risk category is Production, with 10 of the total 31 risks identified for the stock. Finance and Corporate and Macro and Political are the next two major risk categories with 7 risks each. Here are the takeaways from Southern Copper’s risk factors.

The company informs investors that the global economic recovery has created challenges in the global shipping industry. It mentions problems such as congested ports, a shortage of containers, and the lack of space on ships. The company cautions that the issues could take time to resolve and that transportation delays could adversely impact its sales.

Southern Copper tells investors that volatility in metal prices may affect the price of its securities. The company explains that its operating results reflect fluctuations in metal prices. However, volatility in the price of its securities may not reflect its operating performance.

Grupo Mexico is the largest shareholder in Southern Copper with an 88.9% stake. As a result, Grupo Mexico has the ability to influence the outcome of all matters at Southern Copper that require shareholder approval. That includes who sits on the company’s board, the dividends the company can pay, and issues regarding mergers and acquisitions. Southern Copper cautions that Grupo Mexico’s interest may conflict with the interest of the minority shareholders.

Finally, Southern Copper tells investors that tightening environmental regulations could restrict its operations and increase its costs. Further, the company cautions that climate change effects could adversely impact its operations. It mentions rising sea levels, changes in rainfall patterns, and water shortages.

Analysts’ Take

In February, UBS analyst Andreas Bokkenheuser reiterated a Sell rating on Southern Copper stock but raised the price target to $63 from $60. Bokkenheuser’s new price target suggests 16.33% downside potential.

Consensus among analysts is a Hold based on 3 Holds and 1 Sell. The average Southern Copper price target of $63.63 implies 15.50% downside potential to current levels.

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