Industrial Metals

Shares of Canada’s Teck Resources have been creeping upwards in recent weeks, and many investors and market watchers are wondering whether the move signals a rebound for the company.

The share price of Canada’s Teck Resources (TSX:TCK.B) has been creeping upwards in recent weeks, and many investors and market watchers are wondering whether the move signals a rebound for the company.

To be sure, the coal and base metals producer wasn’t immune to losses in 2014, even though it’s been cited by analysts such as Wood Mackenzie’s Joe Aldina as faring better than others in the space. The company has lost about 34 percent, or just under $10, over the past year.

However, a look at Teck’s recent share price performance shows a more positive picture. It’s gained about 40 percent since December 15 — in the midst of the traditional tax-loss selling period — and despite dipping as low as $13.07 on January 14, it’s already back up at around $18. The price change has prompted plenty of speculation over what could be next for Teck, especially with the company set to release its fourth-quarter earnings results on Thursday.

For instance, Greg Barnes of TD Securities has suggested that a weak loonie could be a boon for Teck, according to the Financial Post. Barnes estimates that about 50 percent of Teck’s operating costs are in Canadian dollars, lowering the company’s operating costs amid low coal prices. The analyst is hesitant to recommend investing further in base metals stocks, citing a struggling global economy as problematic for the sector; however, he’s still upped his target for the miner from $17 to $19.

Also positive is the fact that firms such as Haywood Securities and BMO Capital Markets have admitted current oversupply issues in the metallurgical coal space, they’re still positive on met coal prices in the medium and long term — and that certainly isn’t likely to hurt Teck. Indeed, Haywood has pegged the miner as a possible investment for those looking to gain exposure to the space.

That said, Haywood has also lowered its rating for Teck from “buy” to “hold” and has lowered its target share price for the company.

Meanwhile, others have pointed out that lower commodities prices are likely to continue to put pressure on the company in the short term. In a January 23 article, The Globe and Mail notes that Teck is pushing ahead with its Fort Hills oil sands project despite dropping oil prices, while copper, which also makes up a sizable portion of Teck’s business, is similarly suffering from price weakness.

Furthermore, according to an earlier article from the Financial Post, Jorge Beristain of Deutsche Bank (NYSE:DB) isn’t putting much stock in Teck’s promise to pay its dividend to shareholders. The analyst has suggest that both Teck and Freeport-McMoRan (NYSE:FCX) will cut their dividends due to low prices for copper.

In any case, those interested in the story will no doubt be keeping an eye out for the next piece of news from the company on Thursday. On Tuesday, shares of Teck were trading around $18.

 

Securities Disclosure: I, Teresa Matich, hold no direct investment interest in any company mentioned in this article. 

Related reading: 

Haywood Sees Met Coal Prices Averaging $125 in 2015

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