Teck Resources Ltd (USA) (NYSE:TCK) will release its quarterly report on Thursday, and after big plunges in precious and base metals prices, shareholders are bracing themselves for the worst. For investors with a longer-term perspective, though, the more important issue is whether the plunge in Teck earnings will prove to be a temporary drop that presents a smart buying opportunity for the stock.
Teck Resources Ltd (USA) (NYSE:TCK) produces a wide variety of different metals, ranging from copper, coal, and zinc to silver, lead, and molybdenum. But it also has its fingers in the gold mining industry with projects that have substantial potential for gold production in the long run. Let’s take an early look at what’s been happening with Teck Resources over the past quarter and what we’re likely to see in its quarterly report.
Stats on Teck Resources
|Analyst EPS Estimate||$0.32|
|Change From Year-Ago EPS||(40%)|
|Revenue Estimate||$2.08 billion|
|Change From Year-Ago Revenue||(18.6%)|
|Earnings Beats in Past Four Quarters||2|
Source: Yahoo! Finance.
Can Teck earnings hold up this quarter?
Deteriorating conditions in the metals markets have led analysts to pull back on their views on Teck Resources Ltd (USA) (NYSE:TCK) earnings during the past few months, cutting 20% from their June-quarter estimates and reducing full-year 2013 and 2014 expectations by 15%-25%. The stock has largely stabilized after its bigger losses from earlier in the year, but shares are still down another 4% since mid-April.
Teck’s woes have been going on for a while, especially given weak conditions in the metallurgical coal market that have persisted for years. Its first-quarter report showed weakness that’s consistent with what we’ve seen from Cliffs Natural Resources Inc (NYSE:CLF), which also specializes in steelmaking materials like met coal and iron ore and has suffered the worst performance in the S&P 500 so far this year due to poor industry conditions. Yet even Teck Resources Ltd (USA) (NYSE:TCK)’s copper exposure didn’t help it, as delays in its Chilean Quebrada Blanca copper-expansion project related to assessments of social and environmental impact will push back long-term plans for greater copper production.
But that hasn’t stopped Teck Resources Ltd (USA) (NYSE:TCK) from making moves to try to boost its prospects. In June, the company made an asset exchange with Royal Dutch Shell plc (ADR) (NYSE:RDS.A) unit Shell Canada in the oil sands region of northeastern Alberta, trading blocks that it expects to boost Teck’s project resources estimates and resolving some objections that Teck had with Shell’s regulatory application for its projects in the area. Teck also made a minor purchase last month, paying C$2.4 million to sustain its 42.5% stake in Horizonte Minerals following a private placement of new Horizonte shares.
For investors, Teck scored a major victory by getting regulatory approval to renew its share buyback program. With the right to buy as many as 20 million shares, Teck will be able to take advantage of the cheap stock and provide some support to its flagging share price.