Financial Comparison: Alcoa (NYSE:AA) and Southern Copper (NYSE:SCCO)

Alcoa (NYSE:AA) and Southern Copper (NYSE:SCCO) are both large-cap materials companies, but which is the superior investment? We will contrast the two businesses based on the strength of their earnings, institutional ownership, risk, analyst recommendations, profitability, valuation and dividends.

Institutional & Insider Ownership

7.9% of Southern Copper shares are owned by institutional investors. 0.1% of Southern Copper shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Volatility & Risk

Alcoa has a beta of 1.74, suggesting that its stock price is 74% more volatile than the S&P 500. Comparatively, Southern Copper has a beta of 1.11, suggesting that its stock price is 11% more volatile than the S&P 500.

Valuation & Earnings

This table compares Alcoa and Southern Copper”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Alcoa	$12.83 billion	0.86	$1.16 billion	$4.86	8.64
Southern Copper	$13.42 billion	12.79	$4.33 billion	$6.84	30.08

Southern Copper has higher revenue and earnings than Alcoa. Alcoa is trading at a lower price-to-earnings ratio than Southern Copper, indicating that it is currently the more affordable of the two stocks.

Dividends

Alcoa pays an annual dividend of $0.40 per share and has a dividend yield of 1.0%. Southern Copper pays an annual dividend of $4.40 per share and has a dividend yield of 2.1%. Alcoa pays out 8.2% of its earnings in the form of a dividend. Southern Copper pays out 64.3% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years.

Analyst Recommendations

This is a summary of recent recommendations and price targets for Alcoa and Southern Copper, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Alcoa	1	5	7	0	2.46
Southern Copper	7	5	3	0	1.73

Alcoa currently has a consensus price target of $61.42, suggesting a potential upside of 46.33%. Southern Copper has a consensus price target of $146.84, suggesting a potential downside of 28.62%. Given Alcoa’s stronger consensus rating and higher possible upside, equities research analysts plainly believe Alcoa is more favorable than Southern Copper.

Profitability

This table compares Alcoa and Southern Copper’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Alcoa	9.48%	18.90%	7.71%
Southern Copper	35.87%	49.04%	25.81%

Summary

Southern Copper beats Alcoa on 11 of the 16 factors compared between the two stocks.

About Alcoa

Alcoa Corporation, together with its subsidiaries, produces and sells bauxite, alumina, and aluminum products in the United States, Spain, Australia, Iceland, Norway, Brazil, Canada, and internationally. The company operates through two segments, Alumina and Aluminum. It engages in bauxite mining operations; and processes bauxite into alumina and sells it to customers who process it into industrial chemical products, as well as aluminum smelting and casting businesses. The company offers primary aluminum in the form of alloy ingot or value-add ingot to customers that produce products for the transportation, building and construction, packaging, wire, and other industrial markets; and flat-rolled aluminum in the form of sheet, which is sold primarily to customers that produce beverage and food cans. In addition, it owns hydro power plants that generates and sells electricity in the wholesale market to traders, large industrial consumers, distribution companies, and other generation companies. The company was formerly known as Alcoa Upstream Corporation and changed its name to Alcoa Corporation in October 2016. The company was founded in 1886 and is headquartered in Pittsburgh, Pennsylvania.

About Southern Copper

Southern Copper Corporation engages in mining, exploring, smelting, and refining copper and other minerals in Peru, Mexico, Argentina, Ecuador, and Chile. The company is involved in the mining, milling, and flotation of copper ore to produce copper and molybdenum concentrates; smelting of copper concentrates to produce blister and anode copper; refining of anode copper to produce copper cathodes; production of molybdenum concentrate and sulfuric acid; production of refined silver, gold, and other materials; and mining and processing of zinc, copper, molybdenum, silver, gold, and lead. It operates the Toquepala and Cuajone open-pit mines, and a smelter and refinery in Peru; and La Caridad, an open-pit copper mine, as well as a copper ore concentrator, a SX-EW plant, a smelter, refinery, and a rod plant in Mexico. The company also operates Buenavista, an open-pit copper mine, as well as two copper concentrators and two operating SX-EW plants in Mexico. In addition, it operates underground mines that produce zinc, lead, copper, silver, and gold; a coal mine; and a zinc refinery. The company has interests in 156,818 hectares and 502,688 hectares of concessions in Peru and Mexico; and 168,200 hectares and 28,453 hectares of exploration concessions in Argentina and Chile. Southern Copper Corporation was incorporated in 1952 and is based in Phoenix, Arizona. Southern Copper Corporation is a subsidiary of Americas Mining Corporation.