Get the Latest Investment Ideas Delivered Straight to Your Inbox. Subscribe

TICKERS: TECK

Miner Delivers' a Record Quarter and Still Getting Better,' Analyst Says
Research Report

Share on Stocktwits

Source:

"Given this actual and expected strong balance sheet, we expect Teck Resources could announce a one-time capital return to shareholders with its February earnings and guidance release," noted a BMO Capital Markets report.

In an Oct. 27 research note, analyst Jackie Przybylowski reported that
BMO Capital Markets increased its target price on Teck Resources Ltd. (TECK:TSX; TECK:NYSE) to CA$54 per share from CA$50 due to the miner's strong Q3/21 results and expected Q4/21 coal prices. Teck's current share price is about CA$34.95.

"BMO has an Outperform rating on Teck Resources."
—Analyst Jackie Przybylowski 

 

 

 

In Q3/21, "a stellar quarter" for British Columbia's Teck Resources, Przybylowski described, the mining company achieved record quarterly EBITDA and earnings per share (EPS), both exceeding the forecasts of both BMO and the Street.

Przybylowski discussed Teck's quarterly earnings, BMO's near-term cash flow and coal price expectations and, base on those, revisions made to its model on the miner.

Teck's Q3/21 adjusted EBITDA was CA$2.1 billion (CA$2.1B) whereas BMO expected it to be around CA$1.8B. As for adjusted EPS, it was CA$1.88 versus consensus' forecast of CA$1.46 and BMO's projection of CA$1.41.

The beat was due largely to better-than-expected realized coal prices, purported Przybylowski. Coal prices turned out to be about US$237 per ton (US$237/ton), higher than BMO and consensus' projections of US$230/ton and US$214/ton, respectively.

Given that coal prices have averaged US$370/ton for free on board and US$561/ton for cost of freight since September 1, 2021, BMO raised the coal price it expects Teck to realize in Q4/1 to US$390/ton from US$370/ton. However, BMO expects the upward trend in coal prices to reverse in 2022 when compared to the spot price.

BMO also predicts capex for Teck's QB2 project will exceed the CA$5.26B budget by at least 5%, Przybylowski indicated. Plus, COVID-related costs, estimated to be US$600 million, could also be higher, taking the total capex to more like CA$6.1B. Thus, in its model on Teck, BMO increased QB2 capex to CA$6.2B from its previous estimate of CA$5.9B.

On the other hand, BMO anticipates Teck will generate lots of cash in Q4/21 and in 2022, perhaps even culminating in a one-time capital payout to shareholders. This is before QB2 comes online, which is expected to happen in late 2022.

"Strong cash flows today provide a cushion tomorrow," Przybylowski wrote.

BMO has an Outperform rating on Teck Resources.

[NLINSERT]

Disclosures:
1) Doresa Banning compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees. 
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the decision to publish an article until three business days after the publication of the article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases. 

IMPORTANT DISCLOSURES for BMO, Teck Resources, Oct. 27, 2021

Analyst's Certification
I, Jackie Przybylowski, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.
Analysts who prepared this report are compensated based upon (among other factors) the overall profitability of BMO Capital Markets and their affiliates, which includes the overall profitability of investment banking services. Compensation for research is based on effectiveness in generating new ideas and in communication of ideas to clients, performance of recommendations, accuracy of earnings estimates, and service to clients.
Analysts employed by BMO Nesbitt Burns Inc. and/or BMO Capital Markets Limited are not registered as research analysts with FINRA. These analysts may not be associated persons of BMO Capital Markets Corp. and therefore may not be subject to the FINRA Rule 2241 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.

Company Specific Disclosures
Disclosure 5: BMO Capital Markets or an affiliate received compensation for products or services other than investment banking services within the past 12 months from Teck Resources.
Disclosure 6C: Teck Resources is a client (or was a client) of BMO Nesbitt Burns Inc., BMO Capital Markets Corp., BMO Capital Markets Limited or an affiliate within the past 12 months: C) Non-Securities Related Services.
Disclosure 8A: BMO Capital Markets or an affiliate has a financial interest in 1% or more of any class of the equity securities of Teck Resources.
Disclosure 8C: BMO Capital Markets or an affiliate has a financial interest in 0.5% or more in the issued share capital of Teck Resources.
Disclosure 9B: BMO Capital Markets makes a market in Teck Resources in United States.
Disclosure 22: Teck Resources has a security with subordinate voting shares

For Important Disclosures on the stocks discussed in this report, please go to https://researchglobal0.bmocapitalmarkets.com/public-disclosure/.

BMO Capital Markets or its affiliates will buy from or sell to customers the securities of issuers mentioned in this report on a principal basis. BMO Capital Markets or its affiliates, officers, directors or employees have a long or short position in many of the securities discussed herein, related securities or in options, futures or other derivative instruments based thereon. The reader should assume that BMO Capital Markets or its affiliates may have a conflict of interest and should not rely solely on this report in evaluating whether or not to buy or sell securities of issuers discussed herein.




Want to read more about Base Metals and Coal investment ideas?
Get Our Streetwise Reports Newsletter Free and be the first to know!

A valid email address is required to subscribe