The copper market has been on a remarkable upswing in 2024, with prices surging over 20% since mid-February to reach a two-year peak of nearly $10,000 per metric ton. Fears of supply shortages have fueled this rally, due to a lack of new mining projects; meanwhile, First Quantum Minerals (FQVLF) had to shutter operations at the Cobre Panama mine, which accounted for around 350,000 metric tons of annual copper production, and major producer Anglo-American (NGLOY) downwardly revised its 2024 production guidance.
Hedge fund manager Pierre Andurand even predicts that copper prices could soar to $40,000 per tonne within the next few years due to the electrification of global industries, including electric vehicles (EVs), solar panels, wind farms, and data centers. Given this strong demand outlook and copper's critical role in the green energy transition, SocGen analysts say that now is a prime time to bet on mining stocks that look well-positioned to benefit from these trends.
Companies like Freeport-McMoRan (FCX) and Teck Resources (TECK) are at the forefront, with extensive copper (HGN24) reserves and expansion projects that align with the growing demand for cleaner energy solutions. Let's take a closer look at these two mining stocks, and their upside potential in the context of the green energy transition.
Copper Stock #1: Freeport-McMoRan
Freeport-McMoRan Inc. (FCX) is a big name in the global natural resources sector, focusing mainly on copper mining. They explore, mine, and produce copper, gold (GCM24), and molybdenum, with copper being their main moneymaker.
Over the past year, FCX's stock has done really well, thanks to the rising demand for copper. The stock's 52-week return of 50.5% comfortably outperforms the S&P 500 Index ($SPX), up 24.4% for the period. Year-to-date, FCX has gained about 23%, and is now trading roughly in line with the mean target price of $52.20 set by analysts.
In the first quarter of 2024, Freeport-McMoRan reported impressive financial results, beating Wall Street estimates. The company posted revenue of $6.32 billion, up 17% from the same period in 2023, and net income of $473 million, down 29% from the previous year due to higher expenses. The earnings per share (EPS) came in at $0.32, surpassing analysts' expectations of $0.27. Freeport produced 1.1 billion pounds of copper in the first quarter of 2024, up from 965 million pounds a year earlier, thanks to a 49% increase in output from its Indonesian operations.
FCX has a solid track record of paying dividends, with a quarterly payout of $0.075. The miner yields 0.57% annually based on the current stock price.
The company's valuation metrics, including a forward price/sales ratio of 3x, indicate that FCX is priced at a bit of a premium right now, compared to both historical averages and some of its peers. Given copper's crucial role in the green energy transition, the demand for the metal is expected to stay strong, potentially justifying this premium valuation.
Analysts are generally positive about FCX, with the 15 experts in coverage handing out 8 “strong buy” ratings, 1 “moderate buy” rating, and 6 “hold” ratings. The Street-high price target of $60 is about 14% overhead.
Copper Stock #2: Teck Resources
Teck Resources Limited (TECK) is a top Canadian mining company, focusing on copper, zinc, and steelmaking coal. As one of Canada's largest mining firms, Teck is key in supplying metals and minerals essential for a low-carbon future.
Over the past year, TECK's stock has performed well. Year-to-date, the stock has gained 22% \- and now trades not too far below its mean target price of $53.45 among analysts.
Similar to FCX, TECK's forward P/E ratio of 20.09 and P/S of 2.20 are a little steeper than usual; however, given the expected strong demand for copper going forward, this premium may be justified.
Financially, TECK reported Q1 2024 revenues of $2.91 billion, up 5.4% year-over-year. EPS of $0.56 fell short of expectations, with earnings weighed by lower commodity prices and higher costs. Copper production increased by 74% to 99,000 tonnes, driven by the QB operation ramp-up.
Analysts expect TECK to generate revenues between $10.81 billion and $12.67 billion for 2024, with an average EPS estimate of $2.18.
The company has consistently paid dividends for the past decade, with the quarterly payments of $0.09 yielding about 0.72% annually. Additionally, Teck's Board of Directors authorized up to CAD $500 million in share buybacks, reflecting the company's commitment to returning capital to shareholders.
Analysts are generally positive about TECK, based on the 18 recommendations out there: 12 “strong buys,” 4 “moderate buys,” and 2 “hold” ratings. The Street-high price target is $65, indicating upside potential of 24.8%.
Why FCX and TECK Look Like Stocks to Buy Right Now
At the end of the day, copper is shaping up to be a key player in the global push for sustainable energy, with demand expected to stem from multiple industries. Companies like Freeport-McMoRan and Teck Resources are well-positioned to cash in on the rising demand, ramping up production and positioning themselves as major suppliers.
With the world going green, it's no surprise investors are eyeing these copper giants as potential winners in the renewable revolution. So if you are looking to get in on the ground floor of the energy transition, these literal pick-and-shovel copper stocks could be a solid bet.
On the date of publication, Ebube Jones did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.