Buy Southern Copper (SCCO) on Recent Weakness, FBR Capital Says

FBR Capital analyst Mitesh Thakkar reiterated an Outperform rating and $37 price target on Southern Copper (NYSE: SCCO) saying the recent pullback creates a buying opportunity.

Thakkar said, "Since February 14, Southern Copper Corporation (SCCO) shares have declined by 15% compared with the S&P 500 increase of roughly 2% amid concerns that slowing Chinese growth and increasing Chinese bonded copper stockpiles (used as collateral in shadow banking financing deals) could derail the improvement seen in global copper markets in recent months. While the LME spot copper price fell to $2.95/lb, the lowest level since July 2013, we continue to believe prices will remain supported around $3/lb to reflect the marginal cost of supply ($2.88/lb) and the need to incentivize new projects to meet demand growth through 2016-2017. Our thesis on SCCO continues to be driven by our view that free cash flow generation post-2014, when current project capex begins to decline, should lead to meaningful dividend growth. Furthermore, we believe SCCO's low-cost asset base and solid balance sheet (net debt 0.8x EBITDA and 10% of market cap) limit the downside risk relative to peers from a meaningful decline in commodity prices."

For an analyst ratings summary and ratings history on Southern Copper click here. For more ratings news on Southern Copper click here.

Shares of Southern Copper closed at $27.71 yesterday.

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