Hudbay Minerals Inc.: A Mining Stock to Consider Amidst Commodity Demand?

Based in Toronto, Canada, Hudbay Minerals Inc. (HBM) is a diversified mining company specializing in copper mining with a robust presence across tier-one, mining-friendly regions in Canada, Peru, and the United States. The company’s operations span the Constancia mine in Peru, Snow Lake in Manitoba, and the Copper Mountain mine in British Columbia.

The company recently reported its financial results for the third quarter of 2024. HBM’s revenue of $485.77 million surpassed the analysts’ estimate of $452.82 million. Also, its EPS of $0.13 beat the Street’s expectation of $0.05.

During the third quarter, HBM secured an Aquifer Protection Permit from the Arizona Department of Environmental Quality for the Copper World project. This permit marked a key milestone for the company, having the potential to advance its next major growth initiative. The project is expected to boost the company’s annual copper production by over 50%, establishing its leadership in meeting global copper demand.

The company reported record copper and gold production for the quarter, projecting growth from the prior quarter. Its silver and zinc production was also strong. Amid the growing demand for metals like Gold and robust demand for minerals like copper and zinc, the company's prospects are robust.

The worldwide copper market is expected to reach $269 billion in 2024 and is set to exhibit a CAGR of 5.4%, reaching a value of $368.80 billion by 2030. As the company continues to expand its production capabilities and expand its operations to new horizons, it stands to capitalize on the favorable trends of the market.

Shares of HBM have surged 65.2% year-to-date and 102.7% over the past year to close its last trading session at $9.12.

Let’s look at factors that could influence HBM’s performance in the upcoming months.

Robust Financials

During the third quarter that ended September 30, 2024, HBM attained copper and gold production of 31,354 tonnes and 89,073 ounces, up 9.7% and 52% from the prior quarter, respectively.

HBM’s revenue increased 1.1% year-over-year to $485.77 million, and its adjusted earnings before income taxes grew by 55.6% from the year-ago value to $85.40 million. The company’s adjusted EBITDA of $206.20 million indicates growth of 8.1% from the prior year’s quarter.

In addition, the company’s adjusted net earnings attributable to owners came in at $50.30 million and $0.13 per share, up 107.8% and 85.7% year-over-year, respectively. Also, the company’s total assets stood at $5.51 billion as of September 30, 2024, compared to $5.31 billion as of December 31, 2023.

Solid Historical Growth

HBM’s revenue and EBITDA have grown at respective CAGRs of 13.4% and 31.2% over the past three years. The company’s tangible book value has increased at a CAGR of 18.3% over the same timeframe, while its total assets and levered free cash flow have improved at CAGRs of 6.9% and 42.1%, respectively.

Favorable Analyst Estimates

Analysts expect HBM’s revenue for the fourth quarter (ending December 2024) to increase 4.2% year-over-year to $627.61 million. The consensus EPS estimate of $0.30 for the ongoing quarter indicates a 51.8% year-over-year improvement. Moreover, HBM has an impressive earnings surprise history, having topped consensus revenue and EPS estimates in three of the trailing four quarters.

For the fiscal year ending December 2024, the company’s revenue and EPS are expected to grow 21.4% and 139.1% year-over-year to $2.05 billion and $0.55, respectively. Additionally, Street expects its revenue and EPS for the fiscal year 2025 to increase 13.7% and 67.9% year-over-year to $2.33 billion and $0.92, respectively.

High Profitability

HBM’s trailing-12-month EBIT margin of 19.56% is 85.4% higher than the industry average of 10.55%. Its trailing-12-month gross profit margin of 48.68% is 67.7% higher than the industry average of 29.03%. Similarly, the stock’s trailing-12-month levered FCF margin of 14.26% is significantly higher than the industry average of 5.16%.

Furthermore, the stock’s trailing-12-month ROTC of 6.64% is favorable compared to the industry average of 4.80%.

POWR Ratings Reflect Promise

HBM’s solid fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, translating to a Buy in our proprietary system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. HBM has a B grade for Growth, which is in sync with its impressive historical growth and solid financial performance in the last reported quarter.

In addition, the stock has a B grade for Sentiment, consistent with its optimistic analysts’ expectations.

HBM is ranked #7 in the 29-stock Industrial - Metals industry.

Beyond what I have stated above, we have also given HBM grades for Quality, Value, Momentum, and Stability. Get access to all the HBM ratings here.

Bottom Line

HBM reported better-than-expected earnings for the third quarter of fiscal 2024. The company’s growth is being navigated through its strong industry footing, rising demand for copper and zinc, strategic alliances, and solid financial performance, positioning it for bright long-term prospects.

Further, the recent permits and approval in respect of the Copper World project will further boost HBM's capacity and capabilities.

Given HBM’s solid financials, accelerating profitability, favorable analysts’ estimates, and promising growth outlook, this stock could be an ideal buy now.

How Does Hudbay Minerals Inc. (HBM) Stack Up Against Its Peers?

While HBM has an overall POWR Rating of B, investors could also check out these other stocks within the Industrial - Metals industry with A (Strong Buy) or B (Buy) ratings:

Valmont Industries, Inc. (VMI), Alphamin Resources Corp. (AFMJF), and BHP Group Ltd. ADR (BHP).

For exploring more A and B-rated industrial - metals stocks, click here.

What To Do Next?

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HBM shares were trading at $9.20 per share on Monday morning, up $0.08 (+0.88%). Year-to-date, HBM has gained 67.00%, versus a 27.12% rise in the benchmark S&P 500 index during the same period.

Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.

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