Freeport-McMoRan, Teck Resources lead copper producers lower as Morgan Stanley cuts

Freeport-McMoRan (NYSE:FCX) -3.6% and Teck Resources (NYSE:TECK) -2.7% in Tuesday's trading as Morgan Stanley downgraded both stocks to Equal Weight from Overweight with respective $54 and $44 price targets, noting that copper equities under the bank's coverage have outperformed the LME copper price by 28 percentage points since April 8, making their risk/reward less compelling, particularly as LME copper should face a period of consolidation or modest decline once U.S. Section 232 import tariffs are in place and "extra" U.S. front-loading demand fades.

Morgan Stanley analysts led by Carlos De Alba still see some upside in Freeport (NYSE:FCX) shares, as the company benefits from comparatively high exposure to Comex copper prices and a strong gold outlook, but the risk-reward now looks less compelling, with few positive catalysts in the near term.

Meanwhile, Teck (NYSE:TECK) shares have re-rated higher and now trade in line with pure-play copper peers, which De Alba believes is justified given the company’s growth options and rising free cash flow, which may result in higher dividends in coming years, however, further re-rating requires a successful ramp of the Quebrada Blanca expansion with multiple quarters of solid performance.

Southern Copper (SCCO) -2.6% as De Alba downgraded to Underweight from Equal Weight with a $99 PT, as the stock's valuation looks overdone relative to its historical average and trades at an above-average premium compared to peers; the analyst expect the company's exposure to Comex prices to decline in 2026, reducing its realized pricing more than peers, as the company does not mine copper in the U.S.

The bank also downgraded Nexa Resources (NEXA) to Underweight from Equal Weight with a $5 PT, citing a less optimistic view on zinc prices, as the company continues to face setbacks with the ramp-up of the Aripuanã mine and operational issues at other mines that may make it difficult to reach its current production guidance.