Southern Copper Corporation
SCCO
$176.84
+1.93%
Southern Copper Corporation is a vertically integrated producer of copper and associated by-products — molybdenum, silver, zinc, lead and gold — that owns and operates mining, smelting and refining assets across Peru and Mexico, with sales spanning the Americas, Europe and Asia. It is one of the world's largest copper reserve holders and is widely regarded as a low-cost, long-life asset operator, with a cost position management describes as near-zero net cash cost, giving it a distinct margin advantage over higher-cost peers. The current investor debate centers on a powerful cyclical earnings upswing — Q3 2026 revenue rose roughly 39% year over year with net margins near 38% — set against an unusually polarized sell-side view that has grown more cautious even as copper prices and volumes have surged. Recent coverage highlights the tension between the company's organic growth pipeline and electrification/AI-driven copper demand on one side, and geopolitical demand-destruction risk plus a stretched valuation on the other.…
SCCO
Southern Copper Corporation
$176.84
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Investment Opinion: Should I buy SCCO Today?
Rating: Hold. Southern Copper is a best-in-class, low-cost copper franchise (66.0% gross margin, 59.9% operating margin, 39.3% ROE, near-zero net cash cost) whose shares at $173.49 already discount a great deal of that quality — the 17-analyst consensus is 'underperform' with a mean rating of 3.78 and an average target of $174.82, implying just +0.8% upside, so the risk/reward is roughly symmetric rather than compelling in either direction. The core thesis is that exceptional operating execution and structural electrification/AI copper demand are real, but the market is paying a premium multiple for them at a cyclical peak in margins.
Supporting evidence is genuinely strong on fundamentals: Q3 2026 revenue of $4.70 billion grew 39.1% year over year and accelerated sequentially ($4.25B → $4.29B → $4.70B), gross margin expanded to 65.95% from 61.98% in Q2, diluted EPS stepped up from $1.92 to $2.01 to $2.15, and TTM free cash flow of $6.46 billion covers the $918 million quarterly dividend at a 57.3% payout ratio (2.15% yield). But the price already reflects much of this: trailing PE of 26.3x sits above the 21.7x–23.6x range seen through 2026 and the 19.0x–22.7x of 2025, price-to-book of 10.46x is near the top of a multi-year range that bottomed near 4.3x in Q3 2022, and price-to-free-cash-flow of 99.4x leaves little room for copper disappointment — only the 1.07 PEG argues growth is fairly priced, with forward PE of 23.0x implying roughly 14% EPS growth to consensus $8.94.
Three risks could invalidate the thesis: copper price normalization on demand destruction (copper is $3.46 billion of segment revenue, so the 38.4% net margin is essentially a leveraged metal bet), multiple mean-reversion from 26.3x toward its historical mid-range, and persistent bearish sell-side positioning (11 Sells, no upgrades in the visible record from Barclays, UBS or Morgan Stanley). This Hold would upgrade to Buy if the stock pulled back toward the $137.96 analyst low (about -20.5%) while margins held above 60% gross, or if a major firm broke ranks with an upgrade and copper held current levels; it would downgrade to Sell on a decisive break below the $163–$168 support zone or evidence of copper surplus building. Verdict: fairly valued to modestly overvalued relative to its own history and the analyst consensus — a quality asset at a full price, not a bargain.
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SCCO 12-Month Price Forecast
Southern Copper presents a textbook quality-versus-price tension: the operating story is exceptional (39.1% revenue growth, 66% gross margin, $6.46 billion TTM free cash flow, near-zero net cash cost) but the valuation at 26.3x trailing earnings and 10.46x book already capitalizes much of that excellence, and the sell-side consensus of 'underperform' with just 0.8% implied upside confirms professionals see it as fully valued. The 55% base case of a $163–$185 range reflects the most likely path — copper range-bound, earnings normalizing toward $8.94 consensus EPS, and the multiple drifting sideways. The 25% bear case carries real weight because the stock is already 20.6% below its high with negative short-term momentum and a 30.2% historical max drawdown, while the 20% bull case requires both copper strength and a sentiment reversal that has not yet appeared. I would upgrade to bullish on a pullback toward $140–$150 that preserves margins, or on a decisive break above $218.46 with an analyst upgrade; I would downgrade to bearish on a loss of $163 support or evidence of copper surplus building.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Southern Copper Corporation's 12-month outlook, with a consensus price target around $175.04 and implied upside of -1.0% versus the current price.
Average Target
$175.04
18 analysts
Implied Upside
-1.0%
vs. current price
Analyst Count
18
covering this stock
Price Range
$138 - $272
Analyst target range
Coverage is broad but decidedly bearish: 17 analysts rate the stock with 1 Buy, 6 Hold and 11 Sell, producing a consensus recommendation of "underperform" and a recommendation mean of 3.78 (where 5 is a strong sell). The average target price of $174.82 implies just +0.8% upside from the current $173.49 — essentially fair value — and the consensus leans clearly bearish despite the stock's 31.8% one-year gain, a notable disconnect between price action and professional sentiment. The target range is wide, from a low of $137.96 (about 20.5% downside) to a high of $272.12 (about 56.8% upside), a spread of roughly 97% of the current price that signals genuine disagreement about the copper cycle rather than mere calibration differences. The high target likely assumes sustained copper strength, continued margin expansion toward the 66% gross margin level and multiple expansion on the organic growth pipeline, while the low target appears to price in copper price normalization, margin compression from the current 38% net margin and demand-destruction risk from geopolitical disruption. Institutional ratings show a consistent negative tilt with no upgrades in the visible record — Barclays has reiterated Underweight four times (July, October), UBS has maintained Sell twice, Morgan Stanley is Underweight and Wells Fargo sits at Equal Weight — indicating analysts are holding or reinforcing cautious stances rather than turning constructive. The combination of a wide target spread, a bearish consensus and persistent reiterations of underweight ratings argues for treating the consensus target as a ceiling rather than a catalyst, and for watching whether any firm breaks ranks with an upgrade as the key sentiment signal.
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Bulls vs Bears: SCCO Investment Factors
The bear case currently has stronger evidence: an 11-to-1 Sell-to-Buy analyst split, a consensus target implying just 0.8% upside, a PE premium to the stock's own 2025–2026 range, and deteriorating one- and three-month momentum all argue the easy money has been made. The bull case rests on genuinely exceptional fundamentals — 39.1% revenue growth, 66% gross margins, 39.3% ROE and $6.46 billion of TTM free cash flow — that are hard to dismiss as cyclical noise. The single most important tension is whether copper prices hold near current levels long enough to sustain 38% net margins, or normalize and compress earnings just as the multiple mean-reverts from 26.3x toward its historical mid-range; that commodity-multiple interaction, more than any company-specific factor, will determine the next 12 months. A secondary tension is the disconnect between price action (up 31.8% over a year) and professional sentiment (underperform), which typically resolves in one direction or the other within a few quarters.
Bullish
- Explosive revenue and margin acceleration: Q3 2026 revenue of $4.70 billion grew 39.1% year over year from $3.38 billion, and the sequential cadence ($4.25B → $4.29B → $4.70B) shows re-acceleration rather than a plateau. Gross margin expanded from 61.98% in Q2 to 65.95% in Q3 while diluted EPS stepped up from $1.92 to $2.01 to $2.15, demonstrating that incremental copper revenue is dropping through at very high incremental margins.
- Best-in-class cost position and returns: Management describes a near-zero net cash cost position, which underpins a 66.0% gross margin, 59.9% operating margin and 61.3% EBITDA margin — far above typical copper-mining economics. ROE of 39.3% and ROA of 27.3% confirm these returns are real rather than accounting artifacts, and the by-product credits (molybdenum $570M, silver $341M) provide a margin kicker.
- Fortress balance sheet and cash generation: Debt-to-equity is just 0.67 and the current ratio is 3.89, with $4.82 billion of cash at quarter-end. TTM free cash flow of $6.46 billion against Q3 capex of only $516 million (a 4.3x coverage ratio) comfortably funds the $918 million quarterly dividend, which is covered at a 57.3% payout ratio and yields 2.15%.
- Structural electrification and AI copper demand: Recent coverage (BHP's copper overtaking iron ore, Motley Fool's long-term takeaways) highlights a structural shift toward copper-driven mining profits tied to AI and electrification demand. SCCO's organic growth pipeline and position as one of the world's largest copper reserve holders give it direct leverage to this multi-year demand theme.
Bearish
- Overwhelmingly bearish analyst consensus: Of 17 analysts, 11 rate Sell versus just 1 Buy and 6 Hold, producing an 'underperform' consensus and a recommendation mean of 3.78. The average target of $174.82 implies only +0.8% upside from $173.49, meaning professionals see the stock as fully valued even after a 31.8% one-year run.
- Valuation at a premium to its own history: The 26.3x trailing PE sits above the 21.7x–23.6x range seen through 2026 and well above the 19.0x–22.7x levels of 2025, while price-to-book of 10.46x is near the top of a multi-year range that bottomed near 4.3x in Q3 2022. Price-to-free-cash-flow of 99.4x and price-to-cash-flow of 24.3x show the market is capitalizing cash flow aggressively, leaving little room for copper price disappointment.
- Deteriorating short-term momentum: The stock is down 14.7% over the past month and 9.9% over three months versus a 31.8% one-year gain, with one-month relative strength of -12.71 versus SPY's -1.99%. The six-month change of -0.19% confirms a stall since roughly May, and the latest session fell 2.25% to $173.49, showing selling pressure persisting into the print.
- Copper concentration and demand-destruction risk: Copper accounts for $3.46 billion of segment revenue, making the investment case overwhelmingly a single-commodity price and volume story. Recent Benzinga coverage flags that Middle East conflict could create a copper surplus from demand destruction, a direct threat to the 38.4% net margin that depends on elevated copper prices.
SCCO Technical Analysis
SCCO is in a structurally intact but recently damaged uptrend: the stock is up 31.8% over the past year and 21.5% year to date, yet at $173.49 it sits only about 59% of the way through its 52-week range of $114.47 to $218.46, roughly 20.6% below the high and 51.6% above the low. That positioning is neither momentum-chasing nor a falling knife — it reflects a stock that has given back a meaningful portion of a strong advance, leaving it in the upper-middle of its range with the long-term trend still positive. The 30.2% max drawdown underscores that this is a high-amplitude cyclical name where pullbacks of this magnitude are routine rather than thesis-breaking. Short-term momentum has deteriorated sharply and is now diverging from the annual trend: the stock is down 14.7% over the past month and 9.9% over three months, versus a 31.8% one-year gain, and the one-month move lags the S&P 500 by 12.7 percentage points (relative strength of -12.71 versus SPY's -1.99%). The six-month change of -0.19% confirms a stall since roughly May, and the most recent session's -2.25% decline to $173.49 from a $177.48 prior close shows selling pressure persisting into the print. This divergence — positive 12-month, negative 1- and 3-month — is characteristic of a mean-reversion pullback within a longer uptrend rather than a confirmed reversal, but it needs a stabilization signal before being treated as a buying opportunity. Key levels are well defined: support clusters at the 52-week low of $114.47, with intermediate support around the $163–$168 zone where the stock repeatedly found buyers in June and July, while resistance sits at the $218.46 52-week high, with a nearer ceiling near $207–$213 where the August and October rallies failed. A decisive break above $218 would signal a fresh leg higher and validate the cyclical earnings story, whereas a loss of $163 would put the $114.47 low in play and confirm the multi-month downtrend. With a beta of 1.155, SCCO is roughly 15.5% more volatile than the market, and a short ratio of 11.04 days-to-cover indicates meaningful bearish positioning — position sizing should account for both the elevated beta and the potential for short-covering rallies.
Beta
1.16
1.16x market volatility
Max Drawdown
-30.2%
Largest decline past year
52-Week Range
$115-$219
Price range past year
Annual Return
+42.0%
Cumulative gain past year
| Period | SCCO Return | S&P 500 |
|---|---|---|
| 1m | -12.9% | -1.0% |
| 3m | -6.3% | -0.2% |
| 6m | -1.4% | +4.0% |
| 1y | +42.0% | +13.6% |
| ytd | +23.9% | +12.4% |
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SCCO Fundamental Analysis
Revenue is in a clear acceleration phase: Q3 2026 revenue of $4.70 billion grew 39.1% year over year versus $3.38 billion in Q3 2025, and the sequential cadence — $4.25 billion in Q1, $4.29 billion in Q2, $4.70 billion in Q3 — shows growth re-accelerating rather than plateauing. Copper dominates the mix at $3.46 billion of segment revenue, with molybdenum at $570 million, silver at $341 million, zinc at $170 million and other at $157 million, meaning the investment case is overwhelmingly a copper-price and volume story with by-products providing a modest margin kicker. The trajectory implies operating leverage is fully engaged: each incremental dollar of revenue is dropping through at high incremental margins, which is precisely the profile investors pay up for in a commodity upcycle. Profitability is exceptional and expanding: Q3 2026 net income was $1.80 billion on a 38.4% net margin, with gross margin at 66.0%, operating margin at 59.9% and EBITDA of $2.88 billion (a 61.3% EBITDA margin). The multi-quarter progression is unambiguous — gross margin climbed from 61.98% in Q2 2026 and 64.75% in Q1 2026 to 65.95% in Q3, while net margin rose from 37.2% to 38.9% to 38.4%, and diluted EPS stepped up from $1.92 to $2.01 to $2.15. These margins are far above typical copper-mining economics, reflecting the low-cost ore bodies and by-product credits, and the 39.3% ROE and 27.3% ROA confirm the returns are real rather than accounting artifacts. The balance sheet and cash generation are strong: debt-to-equity is just 0.67, the current ratio is 3.89, and TTM free cash flow is $6.46 billion, with Q3 operating cash flow of $2.22 billion against capex of only $516 million — a 4.3x capex coverage ratio that leaves ample room for the $918 million quarterly dividend and growth investment. Cash stood at $4.82 billion at quarter-end, and the 57.3% payout ratio plus a 2.15% dividend yield make the distribution well covered, though the 24.3x price-to-cash-flow and 99.4x price-to-free-cash-flow multiples (on the historical ratio series) show the market is capitalizing that cash flow aggressively.
Quarterly Revenue
$4.7B
2026-09
Revenue YoY Growth
+39.1%
YoY Comparison
Gross Margin
66.0%
Latest Quarter
Free Cash Flow
$6.5B
Last 12 Months
Revenue & Net Income Trends (2 Years)
Revenue Breakdown
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Valuation Analysis: Is SCCO Overvalued?
Because Southern Copper is solidly profitable — Q3 2026 net income of $1.80 billion and trailing EPS positive — the PE ratio is the appropriate primary metric, and the trailing PE of 26.3x against a forward PE of 23.0x implies the market expects earnings to grow roughly 14% over the next twelve months, consistent with consensus EPS of $8.94 versus the current run-rate. The gap between trailing and forward multiples is modest rather than dramatic, suggesting the market is not pricing in a step-change acceleration but rather steady normalization of copper-driven earnings. On secondary metrics the stock is expensive in absolute terms: price-to-book of 10.46x, price-to-sales of 8.60x, EV/EBITDA of 14.78x and EV/sales of 8.69x, with a PEG of 1.07 that is the one metric arguing the growth is reasonably priced relative to the multiple. Peer comparison is constrained because the provided valuation dataset contains no explicit industry-average multiples; however, against the historical ratio series, the current 26.3x trailing PE sits above the 21.7x–23.6x range seen through 2026 and well above the 19.0x–22.7x levels of 2025, indicating a premium to its own recent history even as the absolute multiple is below the 34.9x peak recorded in Q4 2023. The premium is defensible on quality — 66% gross margins, 39% ROE and a near-zero net cash cost position are best-in-class for copper producers — but it leaves little room for copper price disappointment. Historically, SCCO's PE has ranged from roughly 12.4x (Q4 2022) to 34.9x (Q4 2023), and the current 26.3x sits in the upper third of that band; its price-to-book of 10.46x is near the top of a multi-year range that bottomed near 4.3x in Q3 2022 and peaked above 12.6x in Q3 2026. The read-through is that the market is pricing optimistic copper-cycle expectations, and mean reversion in either the commodity or the multiple is the principal valuation risk.
PE
26.3x
Latest Quarter
vs. Historical
High-End
5-Year PE Range 12x~26x
vs. Industry Avg
25.4x
Industry PE ~25.4x*
EV/EBITDA
14.8x
Enterprise Value Multiple
Investment Risk Disclosure
Financial and operational risks center on extreme commodity concentration and the earnings volatility it creates. Copper generated $3.46 billion of segment revenue in Q3 2026, so the 38.4% net margin and $2.15 quarterly EPS are essentially a leveraged bet on one metal price; a normalization of copper would compress margins directly, as evidenced by the swing from 28.5% net margin in Q4 2024 to 38.4% today. The valuation compounds this: price-to-free-cash-flow of 99.4x and price-to-book of 10.46x mean the stock depends on continued growth to justify its multiple, and the 57.3% payout ratio on a $918 million quarterly dividend leaves less cushion if cash flow turns. Debt-to-equity of 0.67 and a 3.89 current ratio are comfortable, but the 4.3x capex coverage ratio would narrow quickly in a down-cycle.
Market and competitive risks are dominated by valuation compression and macro sensitivity. At 26.3x trailing PE versus a 21.7x–23.6x range through 2026 and 19.0x–22.7x in 2025, the stock trades at a premium to its own recent history, and its 10.46x price-to-book is near the top of a range that bottomed at 4.3x in Q3 2022 — mean reversion in either the commodity or the multiple is the principal valuation risk. A beta of 1.155 makes SCCO about 15.5% more volatile than the market, and recent Benzinga coverage warns that Middle East conflict could create a copper surplus through demand destruction, a direct threat to the pricing that drives the entire thesis. The persistent Underweight/Sell reiterations from Barclays, UBS and Morgan Stanley, with no upgrades in the visible record, suggest sell-side sentiment could stay a headwind rather than become a catalyst.
In a worst-case scenario, copper prices normalize on demand destruction just as the multiple mean-reverts, producing a double hit to earnings and valuation. The stock already sits 20.6% below its $218.46 52-week high and has suffered a 30.2% max drawdown; a move to the analyst low target of $137.96 would represent roughly -20.5% from the current $173.49, while a retest of the 52-week low of $114.47 would imply about -34% downside. Given the 11.04-day short ratio, such a decline could be accelerated by momentum selling and would likely coincide with a break below the $163–$168 support zone that held in June and July.
FAQ
Ranked by severity: first, commodity concentration — copper is $3.46 billion of segment revenue, so the 38.4% net margin and $2.15 quarterly EPS are a leveraged bet on one metal, and the swing from a 28.5% net margin in Q4 2024 to 38.4% today shows how violently earnings move with price. Second, valuation compression — at 26.3x trailing PE versus a 19.0x–22.7x range in 2025 and 10.46x price-to-book near multi-year highs, mean reversion in the multiple alone could erase a year of earnings growth. Third, geopolitical and macro risk — recent Benzinga coverage flags that Middle East conflict could create a copper surplus through demand destruction, and a beta of 1.155 makes the shares about 15.5% more volatile than the market. Fourth, sentiment and positioning — 11 Sells versus 1 Buy, an 11.04-day short ratio and a 30.2% historical max drawdown mean momentum can amplify declines; the realistic downside in a bad scenario is -20.5% to $137.96 or -34% to the $114.47 52-week low.
The base case carries 55% probability and a $163–$185 range, assuming copper stays range-bound, net margin holds in the mid-30s percent, the $918 million quarterly dividend is maintained, and the multiple drifts sideways around the $174.82 analyst average target. The bear case at 25% probability targets $114.47–$137.96, driven by copper surplus from demand destruction compressing margins while the 26.3x multiple mean-reverts — a double hit that would first break the $163–$168 support zone. The bull case at 20% probability targets $218.46–$272.12, requiring copper strength, gross margin above 66%, and a sell-side upgrade breaking the 11-Sell consensus. The most likely outcome is the base case: modest total return from the 2.15% dividend plus limited capital appreciation, with the key assumption being that copper prices do not break down and margins hold above roughly 60% gross.
On the primary metric, the 26.3x trailing PE sits above the 21.7x–23.6x range the stock traded at through 2026 and well above the 19.0x–22.7x of 2025, placing it in the upper third of its historical band of roughly 12.4x to 34.9x. Secondary metrics reinforce the premium: price-to-book of 10.46x is near the top of a multi-year range that bottomed near 4.3x in Q3 2022, price-to-sales is 8.60x and EV/EBITDA is 14.78x. The one metric arguing fair pricing is the 1.07 PEG, which implies the 23.0x forward PE is roughly matched by expected EPS growth to the $8.94 consensus. The market is therefore paying a quality premium and implicitly expecting copper prices to hold near current levels so that 38% net margins persist. Verdict: fairly valued to modestly overvalued relative to its own history and the analyst consensus — not a bargain, and with limited margin of safety if the copper cycle turns.
From a pure risk/reward standpoint the setup is roughly symmetric rather than compelling: at $173.49 the stock sits just 0.8% below the $174.82 analyst average target, with 11 of 17 analysts rating it Sell and a consensus of 'underperform'. The quality is not in question — 39.1% year-over-year revenue growth, a 65.95% gross margin and $6.46 billion of TTM free cash flow are exceptional — but the 26.3x trailing PE and 10.46x price-to-book already price in a lot of that excellence. The biggest downside risk is a copper-driven margin reset combined with multiple compression, which the bear case maps to $137.96 (-20.5%) and potentially $114.47 (-34%). It is a reasonable buy for long-horizon investors seeking structural copper exposure who can tolerate a 30% drawdown and are willing to accumulate on weakness toward $140–$150; it is a poor buy for anyone expecting near-term upside from here.
This is fundamentally a long-term holding rather than a trading vehicle: the asset base is long-life copper reserves, the growth driver is a multi-year electrification and AI demand theme, and the 2.15% dividend covered at a 57.3% payout ratio rewards patience. Short-term trading is made difficult by the 1.155 beta, the 30.2% max drawdown and the current negative momentum (-14.7% over one month, -9.9% over three months versus a +31.8% one-year gain), which together create wide and unpredictable swings. Earnings visibility is decent at the revenue line but poor at the margin line because profitability is a function of the copper price. A sensible minimum holding period is three to five years to ride a full copper cycle, and given the valuation premium to the stock's own history, staggered accumulation on pullbacks toward $140–$150 is preferable to a single entry at $173.49.