Teck Resources' (TECK) Q4 Earnings & Revenues Lag Estimates

Teck Resources Ltd TECK delivered adjusted earnings of 31 cents per share in fourth-quarter 2019, missing the Zacks Consensus Estimate of 35 cents. The earnings figure also came in lower than year-ago quarter’s 65 cents per share.

Quarterly results reflected the impact of weak commodity markets for the company’s principal products and unfavorable weather conditions in British Columbia.

Including one-time items, the company reported a loss per share of $1.23 compared with earnings per share of 57 cents in the prior year quarter.

Net sales of $2,011 million for the quarter slid 18.2% year over year, missing the Zacks Consensus Estimate of $2,075 million.

Gross profit, before depreciation and amortization, plunged 38% year over year to $663 million, mainly due to decline in steelmaking coal prices. Overall gross margin came in at 33% compared with the year-ago quarter’s 44%.

Adjusted EBITDA was $491.6 million, down 48.3% from the prior-year quarter. EBITDA margin was 24% in the quarter compared with the year-earlier quarter’s 39%.

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 $837.1 million, reflecting a year-over-year plunge of 34%. Operating profit tanked 93.2% year over year to $41 million.

The Copper segment’s net sales dipped 6.5% year over year to $448.5 million in the December-end quarter. The segment’s operating profit came in at $32.6 million in the reported quarter compared with the prior-year quarter’s $69.7 million.
 
The Zinc segment’s net sales dropped 9.1% year over year to $564.4 million in the fourth quarter. The segment’s operating profit plummeted 50.3% year over year to $53.8 million during this period.

The Energy segment’s net sales surged 77.5%, year on year, to $161.3 million in fourth-quarter 2019. The segment reported an operating loss of $973.5 million during this period, wider than the prior-year quarter’s loss of $123.5 million.

Financials

The company had cash and cash equivalents of $791.5 million at the end of 2019 compared with $1,270 million at the end of last year. Long-term debt was $3,729 million at 2019-end, compared with $4,045 million as of Dec 31, 2018. Cash provided by operating activities decreased to $2,688 million in 2019 from the prior year’s $3,253 million.

2019 Results

Teck Resources reported adjusted earnings per share of $2.07 in 2019, down 34% from the prior year’s $3.13. Also, the figure missed the Zacks Consensus Estimate of $2.29 per share. On a reported basis, including one-time items, earnings per share came in at 45 cents compared with the $4.11 recorded in 2019.

Sales came in at $8.97 billion in the year compared with the previous year’s $9.66 billion. The sales figure missed the Zacks Consensus Estimate of $9.13 billion.

Guidance

Prevalent global economic uncertainties and the impact of the coronavirus outbreak are likely to erode commodity prices in the current year. The company is focused on expanding the Quebrada Blanca Phase 2 and Neptune Bulk Terminals projects.

For the ongoing year, the company expects steelmaking coal production between 23 million tons and 25 million tons. For first-quarter 2020, sales volume is projected at 4.8-5.2 million tons for the Steelmaking Coal segment. Copper production in 2020 is expected within 285,000-300,000 tons. Zinc production for this year (including co-product zinc production from the copper business unit) is expected between 600,000 tons and 640,000 tons. Lead production from Red Dog is projected at 95,000-100,000 tons. The company issued its 2020 bitumen production guidance at 33,000-38,000 barrels per day.

Price Performance

The company’s shares have lost 53.2% over the past year, compared to the industry’s decline of 5.8%.

Zacks Rank & Key Picks

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

Some better-ranked stocks in the basic materials space are Daqo New Energy Corp DQ, Sibanye Gold Limited SBGL and Impala Platinum Holdings Limited IMPUY, each currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Daqo New Energy has an expected long-term earnings growth rate of 29%. The company’s shares have surged 114.8% in the past year.

Sibanye has a projected long-term earnings growth rate of 20.4%. Its shares have soared 197.2% over the past year.
   
Impala Platinum has an expected long-term earnings growth rate of 26.5%. The company’s shares have appreciated a whopping 200.8% in a year’s time.

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