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Teck Resources (TECK) Q3 Earnings & Sales Top Estimates, Up Y/Y

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·4 min read
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  • TECK
  • OLN
  • NTR
  • NUE

Teck Resources Ltd TECK reported third-quarter 2021 adjusted earnings per share of $1.49, beating the Zacks Consensus Estimate of $1.07. The bottom line also improved from the 18 cents earned in the prior-year quarter, driven by higher prices of its principal products, most significantly, steelmaking coal.

Including one-time items, the company reported earnings per share of $1.20 compared with the prior-year quarter’s 8 cents per share.

Net sales were $3,153 million, which surged 83% year over year. The top line also surpassed the Zacks Consensus Estimate of $2,744 million.

The steelmaking coal sales volumes improved 16% year over year to 5.9 million tons and was within the company’s guided range. Of this, sales to China accounted for approximately 1.9 million tons. The copper sales volume increased 10% year over year on higher production levels. This was partly offset by a 7% reduction in the sales volumes of zinc in concentrate.

The gross profit, before depreciation and amortization, came in at $1,661 million compared with the year-ago quarter’s $529 million. The gross margin came in at 52.7% compared with the year-ago quarter’s 30.7%. The adjusted EBITDA was $1,664 million, up a whopping 247% from the year-earlier period. The EBITDA margin came in at 53% in the third quarter compared with the year-earlier quarter’s 28%.

Segment Performance

The Steelmaking Coal segment reported sales of $1,434 million, reflecting a year-over-year jump of 173%. The segment reported an operating profit of $818 million against the operating loss of $74 million seen in the prior-year quarter.

The Copper segment’s net sales surged 59%, year over year, to $746 million in the September-end quarter. The segment’s operating profit was $333 million in the reported quarter compared with the year-ago quarter’s $96 million.

The Zinc segment’s net sales were up 26%, year over year, to $829 million during the reported quarter. The segment’s operating profit climbed 52% to $202 million during this period.

The Energy segment’s net sales soared 100% year over year to $141 million in the third quarter. The segment incurred an operating loss of $25 million compared with the prior-year quarter’s $44 million.

Financials

Teck Resources generated cash flow of $1,175 million from operating activities in the third quarter of 2021 compared with the prior-year quarter’s $293 million. The company had cash and cash equivalents of $309.5 million as of Sep 30, 2021, compared with $303 million as of Sep 30, 2020. Total debt was $5,624 million at the end of the third quarter compared with $4,417 million as of Dec 31, 2020.

Project Updates

The progression of its flagship QB2 copper growth project has crossed the two-third mark, despite the COVID-19 impact in Chile. The first production is expected in the second half of 2022. The Neptune port upgrade was ramping up during the quarter.

Guidance

Teck Resources expects steelmaking coal production between 25 million tons and 26 million tons for 2021. Copper production is anticipated within 275,000-290,000 tons. Zinc production is projected between 605,000 tons and 630,000 tons. The company estimates Bitumen production for 2021 between 6.6 million barrels and 8.1 million barrels.

For the fourth quarter, the company expects sales of zinc in concentrate to be 140,000-155,000 tons at Red Dog. Steelmaking coal sales are projected to be 6.4-6.8 million tons for the fourth quarter. The company will continue to prioritize the available spot sales to China. The sales to Chinese customers are priced at the CFR China price assessments, which are higher than the FOB Australia price assessments, thereby boosting its overall realized price.

Price Performance

The company’s shares have soared 128.3%, over the past year, outperforming the industry’s rally of 33.1%.

Zacks Investment Research
Zacks Investment Research

Image Source: Zacks Investment Research

Zacks Rank & Stocks to Consider

Teck Resources currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the basic materials space are Nucor Corporation NUE, Olin Corporation OLN and Nutrien Ltd. NTR. All of these stocks currently flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Nucor has a projected earnings growth rate of around 580% for the current year. The company’s shares have soared 131% in a year’s time.

Olin has an expected earnings growth rate of around 689% for the current fiscal year. The company’s shares have surged 249% in the past year.

Nutrien has an anticipated earnings growth rate of around 180% for 2021. The company’s shares have gained 74% in the past year.


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