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Teck Resources' (TECK) Earnings Beat Estimates in Q2, Up Y/Y

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Teck Resources Ltd (TECK - Free Report) reported second-quarter 2021 adjusted earnings per share of 51 cents, which beat the Zacks Consensus Estimate of 50 cents. The bottom line also improved from 12 cents earned in the prior-year quarter, driven by higher prices of its principal products, most significantly copper and steelmaking coal.

Including one-time items, the company reported earnings per share of 39 cents against a loss of 20 cents in the prior-year quarter.

Net sales were $2,082 million, which increased 68.3% year over year. However, the top line missed the Zacks Consensus Estimate of $2,124 million.

Steelmaking coal sales volumes improved 24% year over year to 6.2 million tons and was within the company’s guided range. Of this, sales to China accounted for approximately 2 million tons. Copper sales volume increased 21% year over year. This was partly offset by 36% reduction in sales volumes of zinc in concentrate.

Gross profit, before depreciation and amortization came in at $861 million compared with the year-ago quarter’s $326 million. Gross margin came in at 41.4% compared with the year-ago quarter’s 26.3%. Adjusted EBITDA was $804 million, up 130.4% from the prior-year quarter. EBITDA margin came in at 39% in the second quarter compared with the year-earlier quarter’s 28%.

Teck Resources Ltd Price, Consensus and EPS Surprise

Teck Resources Ltd Price, Consensus and EPS Surprise

Teck Resources Ltd price-consensus-eps-surprise-chart | Teck Resources Ltd Quote

Segment Performance

The Steelmaking Coal segment reported sales of $904 million, reflecting year-over-year growth of 58%. The segment reported an operating profit of $155 million against the operating loss of $8.6 in the prior-year quarter.

Copper segment’s net sales surged 129% year over year to $667 million in the June quarter. The segment’s operating profit was $339.8 million in the reported quarter, reflecting a turnaround from the operating loss of $8 million in the prior-year quarter.

The Zinc segment’s net sales were up 9% year over year to $375 million during the reported quarter. The segment’s operating profit climbed 21% to $26 million during this period.

The Energy segment’s net sales surged 321% year over year to $133 million in the second quarter. The segment reported an operating loss of $41 million against the prior-year quarter’s profit of $19.4 million.

Financials

Teck Resources generated cash flow of $467 million from operating activities in the second quarter of 2021 compared with $216 million in the prior-year quarter. The company had cash and cash equivalents of $254 million as of Jun 30, 2021, compared with $324 million as of Dec 31, 2020. Total debt was $5,622 million at the end of the second quarter compared with $4,417 million as of Dec 31, 2020.

Project Updates

The construction of its flagship QB2 copper growth project continues to advance well with best quarterly progress so far, despite the COVID-19 impact in Chile. The company expects this project to progress 60% in early August. First production is expected in the second half of 2022. The Neptune port upgrade is now in the site wide ramp-up phase, which continues as planned.

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 third quarter, at Red Dog, the company expects sales of zinc in concentrate to be 180,000-200,000 tons. Steelmaking coal sales are projected to be 5.7-6.1 million tons for the third quarter. 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 120.2% over the past year, outperforming the industry’s rally of 35.6%.

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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 - Free Report) , Cabot Corporation (CBT - Free Report) and Dow Inc. (DOW - Free Report) .

Nucor has a projected earnings growth rate of around 455.4% for the current year. The company’s shares have soared 130.6% in a year. It currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Cabot has an expected earnings growth rate of around 137.5% for the current fiscal. The company’s shares have surged 42.4% in the past year. It currently flaunts a Zacks Rank #1.

Dow has an expected earnings growth rate of around 403.01% for the current year. The company’s shares have gained 45.4% in the past year. It currently carries a Zacks Rank #2.


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