Southern Copper Will Outperform Freeport-McMoRan, Boost Shareholder Value: Analyst

Shares of Southern Copper Corp SCCO have lost almost 14% year to date.

Despite being a smaller company, the Phoenix-based mining company is poised to return more cash to shareholders than Freeport-McMoRan Inc FCX, according to Morgan Stanley.

The Analyst: Carlos De Alba upgraded the rating for Southern Copper from Equal-Weight to Overweight, while establishing a price target of $54.

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The Thesis: Against the backdrop of lower copper prices, Southern Copper is better positioned as it’s a lower-cost producer, De Alba said in the upgrade note.

“Not only do we believe that SCCO will continue to return more cash to shareholders but, more important, we estimate that it will generate more attributable FCF relative to FCX,” the analyst wrote. “SCCO is trading at a 20% discount to FCX, in stark contrast to the ~30% premium at which the stock has traded, on average, over the past decade."

SCCO Price Action: Shares of Southern Copper had risen by 0.95% to $53.04 at the time of publication on Tuesday.