3 Copper Stocks to Buy as Electrification Trends Grow

The copper market is an important component of the global economic landscape. Investing in copper stocks is becoming increasingly attractive due to the global shift towards electrification. Given the industry headwinds, investors may consider buying fundamentally sound copper shares of Southern Copper Corporation (SCCO), Glencore plc (GLNCY), And Lundin Mining Company (LUNMF).

Copper’s superior conductivity makes it indispensable for Electric Vehicles (EVs), renewable energy systems and modern infrastructure. A recently published study by the International Energy Forum (IEF) shows that: Electrifying the global vehicle fleet by 2050, unrealistic increase in copper productionHowever, it may be more feasible to aim for 100% hybrid vehicle production by 2035.

Additionally, the increasing use of electronic devices, renewable energy systems, and infrastructure projects such as construction and urbanization requires the consumption of significant amounts of copper for cabling, plumbing, and architectural applications, increasing the demand for copper. Global copper market expected to grow Compound Growth Rate of 5.1% Until 2034.

With these encouraging trends in mind, let’s take a detailed look at the fundamentals of the top three copper stocks.

Southern Copper Company (SCCO)

SCCO is an integrated producer of copper and precious by-products. It operates mining, exploration, smelting and refining facilities in Peru, Mexico, Argentina, Chile and Ecuador. Its operating segments include Peru operations; Mexican open pit operations; and Mexican underground mining operations.

On August 26, the company paid a quarterly dividend of $0.60 per share and a dividend of 0.0056 shares per share to its shareholders, supported by its strong financial position.

SCCO pays an annual dividend of $2.39; This translates into a 2.10% return at current price levels. The four-year average dividend yield is 4.54%. The company’s dividend payments have grown at a CAGR of 8.5% over the past five years.

The stock’s last 12-month EBITDA margin of 52.99% is 218.6% above the industry average of 16.63%. Similarly, the last 12-month net profit margin of 26.15% is 426.2% above the industry average of 4.97%. Additionally, its ROTA for the last 12 months is 15.47%, which compares favorably with the industry average of 2.35%.

SCCO’s sales in the second quarter (ending June 30, 2024) increased 35.5% year over year to $3.12 billion. The company reported operating income of $1.61 billion, up 78.5% from the prior-year quarter. SCCO’s adjusted EBITDA increased 61.1% year over year to $1.80 billion, while net income per share increased 73.2% from the prior-year quarter to $1.23.

The $2.94 billion consensus revenue estimate for the fiscal third quarter (ending September 2024) represents a 17.4% increase over last year. The current quarter earnings per share estimate of $1.11 indicates a 41.6% improvement over last year. The company has an impressive history of surprises; It has surpassed consensus earnings per share and revenue estimates in three of the last four quarters.

The stock is up 51.3% over the past year, closing at $111.27 in the latest trading session.

SCCOs POWR Ratings It reflects its strong appearance. The stock has an overall rating of B, meaning Buy in our proprietary ratings system. POWR Ratings are calculated by considering 118 different factors, with each factor optimally weighted.

SCCO has an A rating for Quality and a B rating for Stability. The stock ranks 9th out of 28 stocks. Industrial – Metals industry.

To see SCCO’s other ratings for Sentiment, Value, Growth, and Momentum, Click here.

Glencore plc (GLNCY)

Headquartered in Baar, Switzerland, GLNCY is engaged in the production, refining, processing, storage, transportation and marketing of metals, minerals and energy products in the Americas, Europe, Asia, Africa and Oceania. The company operates in two divisions: Marketing Activities and Industrial Activities.

GLNCY’s trailing 12-month asset turnover ratio is 1.88x, 179% above the industry average of 0.67x.

For the half-year ending June 30, 2024, GLNCY’s revenue increased 9% year-on-year to $117.09 billion. It reported adjusted EBITDA for the first half of 2024 at $6.34 billion. funds from operations (FFO) It amounted to $4.04 billion, an increase of 8.8% compared to the previous year’s quarter. As of June 30, 2024, its assets were $120.69 billion.

Analysts expect GLNCY’s fiscal year (ending December 2024) revenue to increase 6.3% year-over-year to $231.60 billion. Additionally, for fiscal 2025, the company’s EPS is expected to increase 19.9% ​​year-over-year to $0.98.

Shares of GLNCY fell slightly on the day, closing at $10.63 in the latest trading session.

GLNCY’s solid fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, equivalent to Buy in our proprietary rating system.

GLNCY has a B rating in Growth and Stability. GLNCY ranks #6 out of 40 stocks the Miners – Diversified industry. You can check GLNCY’s ratings on Value, Momentum, Sentiment, and Quality. Here.

Lundin Mining Company (LUNMF)

LUNMF is a diversified base metal mining company engaged in the exploration, development and mining of mineral properties in Chile, Brazil, the United States, Portugal, Sweden and Argentina. It mainly produces copper, zinc, gold, nickel and molybdenum, as well as lead, silver and other metals.

LUNMF’s CAPEX/Sales ratio for the last 12 months is 24.98%, which is 218.5% higher than the industry average of 7.84%. Similarly, the last 12-month EBIT margin of 17.31% and 4.21% is 59.2% above the industry average of 10.87%.

LUNMF’s revenue in the second quarter of the fiscal year ending June 30, 2024 reached $1.08 billion, an increase of 83.9% compared to the previous year. The company’s adjusted earnings and adjusted earnings per share increased 167.8% and 166.7%, respectively, to $122.10 million and $0.16 from the previous year.

Consensus revenue of $1.20 billion for the third quarter ending September 2024 represents a 20.6% increase from the prior year. EPS is expected to increase by 105.4% year-on-year to $0.23 in the same quarter. Moreover, the company has beaten consensus revenue estimates in three of the last four quarters.

Over the past six months, LUNMF’s shares are up 5.5%, closing at $10.32 in the latest trading session.

LUNMF’s POWR Ratings reflect its solid expectations. The stock has an overall rating of B, meaning Buy in our proprietary ratings system.

LUNMF has an A rating for Growth. Inside Miners – Diversified It ranks 8th among 40 stocks in its sector.

To see LUNMF’s additional ratings on Stability, Value, Momentum, Quality and Sentiment, Click here.

What to Do Next?

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SCCO shares were trading at $120.62 per share, up $9.35 (+8.40%) on Thursday afternoon. Since the beginning of the year, SCCO has increased by 42.42%, compared to a 21.56% increase in the benchmark S&P 500 index in the same period.

About the Author: Nidhi Agarwal

Nidhi is passionate about capital markets and asset management, which led her to pursue a career as an investment analyst. He has a bachelor’s degree in finance and marketing and is pursuing the CFA program. His fundamental approach to analyzing stocks helps investors identify the best investment opportunities. More…

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