Analysts Conflicted on These Materials Names: Select Energy Services Inc (NYSE: WTTR) and Southern Copper (NYSE: SCCO)

By Jason Carr

Companies in the Materials sector have received a lot of coverage today as analysts weigh in on Select Energy Services Inc (WTTRResearch Report) and Southern Copper (SCCOResearch Report).

Select Energy Services Inc (WTTR)

In a report released yesterday, Tom Curran from B.Riley FBR maintained a Buy rating on Select Energy Services Inc, with a price target of $22. The company’s shares closed yesterday at $9.99, close to its 52-week low of $9.11.

Curran observed:

“Select Energy Services (WTTR) reported a top line and adjusted EBITDA of $397.0M and $73.7M, versus consensus of $406.2M and $67.5M and our $415.3M and $68.8M. Thus, although its revenue missed due to the summer onset of the Permian completions activity slowdown (recall that the Permian was 37% of revenue in 2Q18), WTTR still achieved a stronger-than-expected EBITDA margin of 18.6%—exceeding 2Q18’s 17.3% and the Street’s/our 16.6% forecast—on profitability gains across all three divisions. Acknowledging that 4Q and, to some degree, early 1Q are prone to seasonal weakness, we note that 3Q18 adjusted EBITDA annualized is $294.8M, whereas as present 2019 consensus is only $297M.”

According to TipRanks.com, Curran is currently ranked with no stars on a 0-5 star ranking scale, with an average return of -6.7% and a 40.7% success rate. Curran covers the Basic Materials sector, focusing on stocks such as Independence Contract Drilling, Baker Hughes a GE company, and Tetra Technologies.

The word on The Street in general, suggests a Strong Buy analyst consensus rating for Select Energy Services Inc with a $19.30 average price target.

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Southern Copper (SCCO)

In a report released today, Lucas Pipes from B.Riley FBR maintained a Hold rating on Southern Copper, with a price target of $49. The company’s shares closed yesterday at $39.72.

Pipes wrote:

“We are updating our estimates on Southern Copper (SCCO) after incorporating disclosures from the 10-Q in our model. Southern Copper reported 3Q18 earnings on October 24 with adjusted EBITDA of $868.1M, beating consensus $852.7M. On the cost side, Southern Copper reported operating cash costs net of by-product revenues of $0.90/lbs, modestly above $0.81/lbs in 2Q. Total copper sales volumes came in slightly below our expectations at 228K tons, but was up 3% Y/Y . The quarter benefitted from strong sales volumes of both silver and zinc which was partially offset by lower metal prices in copper and other byproducts. Through 9M18, the company has spent $831.8M on capital investments of which $329M has gone towards the Toquepala expansion.”

According to TipRanks.com, Pipes is a 4-star analyst with an average return of 2.7% and a 53.7% success rate. Pipes covers the Basic Materials sector, focusing on stocks such as Peabody Energy Corporation Comm, Novagold Resources Inc New, and Hallador Energy Company.

The word on The Street in general, suggests a Moderate Buy analyst consensus rating for Southern Copper with a $46 average price target.

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