Teck Resources Ltd
TECK
reported first-quarter 2021 adjusted earnings per share of 48 cents, which beat the Zacks Consensus Estimate of 43 cents. The bottom line also improved from earnings of 13 cents in the prior-year quarter courtesy of higher prices of its principal products, most significantly copper, zinc and blended bitumen.
Including one-time items, the company reported earnings per share of 45 cents against a loss of $43 cents in the prior-year quarter.
Net sales were $2,006 million, which increased 13% year over year. However, the top line missed the Zacks Consensus Estimate of $2,050 million. Steelmaking coal sales volumes improved 9% year over year to 6.2 million tons and was within the company’s guidance range. Of this, sales to China accounted for approximately 2 million tons. This was according to the company’s plan to increase sales to China in a bid to capitalize on the increase in demand due to restrictions on Australian coal imports. The company reported decrease in sales volumes of copper, zinc and blended bitumen. However, the impact was offset by higher copper, zinc and blended bitumen prices in the quarter.
Teck Resources Ltd Price, Consensus and EPS Surprise
Gross profit, before depreciation and amortization, inched up 1% year over year to $1,491 million. Gross margin came in at 25.7% compared with the year-ago quarter’s 16.7%. Adjusted EBITDA was $761 million, up 68% from the prior-year quarter. EBITDA margin came in at 38% in the first quarter compared with the year-earlier quarter’s 26%.
Segment Performance
The
Steelmaking Coal
segment reported sales of $824 million, reflecting year-over-year growth of 8%. The segment reported an operating profit of $140 million compared with an operating profit of $204 in the prior-year quarter. This can be attributed to increased sales volumes and lower operating costs.
Copper
segment’s net sales were up 42% year over year to $604 million in the March-end quarter. The segment’s operating profit was $232 million in the reported quarter, reflecting a turnaround from the operating loss of $5 million in the prior-year quarter. This was driven by substantially higher copper prices, which were partially offset by higher unit operating costs and lower copper sales volumes.
The
Zinc
segment’s net sales inched down 1% year over year to $449 million during the reported quarter. The segment’s operating profit climbed 18% year over year to $92 million during this period. Substantially higher zinc prices were somewhat offset by lower sales volumes and higher unit operating costs and royalty expense.
The
Energy
segment’s net sales declined 2% year over year to $128 million in the first quarter. The segment reported an operating loss of $37 million compared with the prior-year quarter’s loss of $582 million. This was due to increase in global benchmark crude oil prices, including Western Canadian Select (WCS), partially offset by higher unit operating costs due to lower production.
Financials
Teck Resources generated cash flow of $461 million from operating activities in the first quarter of 2021 compared with $208 million in the prior-year quarter. The company had cash and cash equivalents of $294 million as of Mar 31, 2021, compared with $354 million as of Dec 31, 2020. Total debt was $5,328 million at the end of the first quarter compared with $4,914 million as of Dec 31, 2020.
Project Updates
The company crossed the half-way mark at its flagship QB2 copper growth project in April. First production continues to be expected in the second half of 2022. The Neptune port upgrade is now in the commissioning phase and ramp-up will continue as planned. So far 18 vessels have been loaded using the new outbound system.
Guidance
Teck Resources expects steelmaking coal production between 25.5 million tons and 26.5 million tons in 2021. Copper production is anticipated within 275,000-290,000 tons. Zinc production is projected between 585,000 tons and 610,000 tons. The company estimates Bitumen production for 2021 between 8.6 million barrels and 12.1 million barrels.
For the second quarter, at Red Dog, the company expects sales of zinc in concentrate to be 35,000-45,000 tons. Zinc sales are expected to be lower than normal in the second quarter owing to reduced production in 2020 due to maintenance and water-related challenges. This resulted in lower concentrate shipments during 2020 and subsequently led to lower offsite zinc inventory available for sale. In the second half of 2021, the company expects sales of zinc in concentrate to be in line with the normal seasonal pattern of Red Dog sales.
Steelmaking coal sales is projected to be 6.0-6.4 million ton for the second quarter of 2021. The company will continue to prioritize available spot sales to China. The sales to Chinese customers are priced at the CFR China price assessments, which are higher than FOB Australia price assessments, thereby boosting its overall realized price.
Price Performance
The company’s shares have soared 151% over the past year, compared with the
industry
’s rally of 55.9%.
Zacks Rank & Stocks to Consider
Teck Resources currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks worth considering in the basic materials space include
Impala Platinum Holdings Limited
IMPUY
,
Nucor Corporation
NUE
and
Cabot Corporation
CBT
. While Impala Platinum Holdings and Nucor sport a Zacks Rank #1 (Strong Buy), Cabot Corporation carries a Zacks Rank #2 (Buy). You can see
the complete list of today’s Zacks #1 Rank stocks here
.
Impala Platinum Holdings has an expected earnings growth rate of 198% for the current fiscal. The company’s shares have soared 225% in the past year.
Nucor has a projected earnings growth rate of 190% for the current fiscal. The company’s shares have rallied 92% in a year.
Cabot Corporation has a projected earnings growth rate of 93% for the current fiscal year. The company’s shares have appreciated 62% in a year.
These Stocks Are Poised to Soar Past the Pandemic
The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.
Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.
See the 5 high-tech stocks now>>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.
Click to get this free report