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Teck Resources (TECK - Free Report) reported second-quarter 2024 adjusted earnings per share (EPS) of 58 cents, which surpassed the Zacks Consensus Estimate of 47 cents by a margin of 23%. The bottom line marked a 37% plunge from earnings of 91 cents per share reported in the year-ago quarter.
Gains from increased copper sales from QB, elevated copper prices and higher steelmaking coal sales volumes were offset by lower steelmaking coal prices. Finance and depreciation and amortization expenses increased year over year, as Teck Resources has started taking the depreciation of QB assets into account and is no longer capitalizing interest on the project. The decline in earnings was also attributed to the reduced ownership in Elk Valley Resources (“EVR”), TECK’s steelmaking coal business.
After the end of the second quarter, TECK completed the sale of EVR, thereby positioning itself as a pure-play energy transition metals company. The cash proceeds of $7.3 billion will be utilized to lower debt, invest in near-term copper growth and return significant cash to shareholders.
Including one-time items, EPS from continuing operations was 50 cents in the second quarter compared with 72 cents in the year-ago quarter.
Teck Resources Ltd Price, Consensus and EPS Surprise
Net sales amounted to around $2.83 billion, an 8% increase from $2.62 billion in the year-ago quarter. The top line, however, missed the Zacks Consensus Estimate of $2.92 billion.
The gross profit was CAD$1.16 billion ($0.8 billion), marking an 18% decline from the year-ago quarter. The gross margin was 30% compared with the year-ago quarter’s 40%.
The adjusted EBITDA was CAD$1.67 billion ($1.22 billion), which marked 13% growth from the year-earlier period. The EBITDA margin was 43.1% compared with the year-ago quarter’s 42%.
Segment Performances
The Steelmaking Coal segment reported sales of CAD$2.07 billion ($1.51 billion), reflecting a year-over-year decrease of 8%. Second-quarter sale volumes were reported at 6.4 million tons, up 3.2% as the business recovered from the extreme cold weather and rail impacts in the first quarter. This was somewhat offset by lower steelmaking prices.
The segment reported a gross profit of CAD$0.7 billion ($0.5 billion), which was down 32% from the second quarter of 2023 due to higher unit operating costs and lower realized steelmaking coal prices, somewhat offset by higher sales volumes.
The Copper segment’s net sales surged 87% year over year to CAD$1.37 billion ($1 billion), attributed to higher production offset by lower copper prices. Total copper production was reported at a record 110,400 tons, 72% higher than the second quarter of 2023. Copper in concentrate production from QB was 51,300 tons in the second quarter, higher than 43,300 tons produced in the first quarter of 2024, reflecting the ongoing ramp up. Improved performances at Antamina and Highland Valley Copper were offset by lower output at Carmen de Andacollo due to the extreme drought conditions.
The segment’s gross profit jumped 94% year over year to CAD$397 million ($290 million) attributed to higher copper prices and sales volume, offset by the depreciation of QB assets.
The Zinc segment’s net sales were down 19% year over year to CAD$433 million ($316 million) as improved zinc prices were offset by lower sales volumes.
The segment’s gross profit marked a significant year-over-year drop of 80% to CAD$21 million ($15 million). This was caused by reduced refined metal sales and zinc premiums at Trail operations and lower sales volumes of zinc concentrate from Red Dog.
Cash Flow & Balance Sheet
Teck Resources generated a cash flow of CAD$1.3 billion ($1 billion), which was higher than the cash flow of CAD$1.13 billion ($0.8 billion) in the second quarter of 2023. The company had cash and cash equivalents of CAD$0.9 billion ($0.7 billion) at the end of the second quarter compared with CAD$0.7 billion ($0.5 billion) at the end of 2023. The debt was CAD$6.04 billion ($4.4 billion) at the end of the second quarter.
TECK returned around CAD$346 million ($252 million) to shareholders in the second quarter, through the purchase of CAD$282 million ($206 million) of Class B subordinate voting shares under its normal course issuer bid, and CAD$64 million ($47 million) as dividends.
Guidance
Copper production in 2024 is anticipated to be in the range of 435,000-500,000 tons, lower than the prior stated range of 465,000-540,000 tons. Zinc production is projected to be between 565,000 tons and 630,000 tons. Refined zinc output is estimated between 275,000 tons and 290,000 tons.
For the third quarter, the company expects sales of zinc in concentrate to be in the range of 250,000-290,000 tons at Red Dog.
Copper net unit costs are expected to be in the range of $1.90 -$2.30 per pound. Zinc net cash unit costs are projected between 55 cents and 65 cents. Details of the Steelmaking Coal Unit Sale
On Nov 13, 2023, Teck Resources announced that it agreed to sell its steelmaking coal business. Glencore (GLNCY - Free Report) agreed to acquire the majority stake (77%). Nippon Steel Corporation agreed to take up 20% and the remaining 3% stake was to be taken up by POSCO (PKX - Free Report) .
On Jan 3, 2024, Nippon Steel fulfilled its part of the deal in exchange for its prior 2.5% interest in Elkview Operations and a payment of $1.3 billion in cash to Teck Resources on closing. Nippon Steel had also agreed to pay $0.4 billion to Teck Resources out of cash flows from EVR. Also, on the same date, Posco exchanged its previous 2.5% interest in Elkview Operations and 20% interest in the Greenhills joint venture for a 3% stake in EVR. On July 11, Teck Resources completed the sale of the remaining stake to Glencore.
The $7.3 billion proceeds will be used to pay down debt, return cash to shareholders and invest in growing TECK's copper portfolio.
TECK’s board has authorized up to a $2.75 billion share buyback and approved payment of an eligible dividend of 62.5 cents per share, including a 50 cents per share supplemental dividend. This will be payable on Sep 27, 2024, to shareholders of record on Sep 13, 2024.
Combined with the previous $500 million authorization announced in February, total cash returns to shareholders of $3.5 billion from the sale of the steelmaking coal business have been authorized.
Price Performance
The company’s shares have gained 7.2% in the past year against the industry’s 6.9% decline.
Freeport-McMoRan Inc. (FCX - Free Report) reported adjusted EPS of 46 cents in the second quarter, which topped the Zacks Consensus Estimate of 39 cents. The bottom line was 31% higher than the year-ago quarter’s EPS of 35 cents. Including one-time items, earnings were 42 cents per share, up around 83% from 23 cents per share in the year-ago quarter.
Revenues rose roughly 15% year over year to $6,624 million. The figure surpassed the Zacks Consensus Estimate of $5,985.9 million. The company witnessed higher copper and gold prices in the quarter, which helped offset the impact of lower sales volumes.
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Teck Resources (TECK) Q2 Earnings Beat Estimates, Decline Y/Y
Teck Resources (TECK - Free Report) reported second-quarter 2024 adjusted earnings per share (EPS) of 58 cents, which surpassed the Zacks Consensus Estimate of 47 cents by a margin of 23%. The bottom line marked a 37% plunge from earnings of 91 cents per share reported in the year-ago quarter.
Gains from increased copper sales from QB, elevated copper prices and higher steelmaking coal sales volumes were offset by lower steelmaking coal prices. Finance and depreciation and amortization expenses increased year over year, as Teck Resources has started taking the depreciation of QB assets into account and is no longer capitalizing interest on the project. The decline in earnings was also attributed to the reduced ownership in Elk Valley Resources (“EVR”), TECK’s steelmaking coal business.
After the end of the second quarter, TECK completed the sale of EVR, thereby positioning itself as a pure-play energy transition metals company. The cash proceeds of $7.3 billion will be utilized to lower debt, invest in near-term copper growth and return significant cash to shareholders.
Including one-time items, EPS from continuing operations was 50 cents in the second quarter compared with 72 cents in the year-ago quarter.
Teck Resources Ltd Price, Consensus and EPS Surprise
Teck Resources Ltd price-consensus-eps-surprise-chart | Teck Resources Ltd Quote
Net sales amounted to around $2.83 billion, an 8% increase from $2.62 billion in the year-ago quarter. The top line, however, missed the Zacks Consensus Estimate of $2.92 billion.
The gross profit was CAD$1.16 billion ($0.8 billion), marking an 18% decline from the year-ago quarter. The gross margin was 30% compared with the year-ago quarter’s 40%.
The adjusted EBITDA was CAD$1.67 billion ($1.22 billion), which marked 13% growth from the year-earlier period. The EBITDA margin was 43.1% compared with the year-ago quarter’s 42%.
Segment Performances
The Steelmaking Coal segment reported sales of CAD$2.07 billion ($1.51 billion), reflecting a year-over-year decrease of 8%. Second-quarter sale volumes were reported at 6.4 million tons, up 3.2% as the business recovered from the extreme cold weather and rail impacts in the first quarter. This was somewhat offset by lower steelmaking prices.
The segment reported a gross profit of CAD$0.7 billion ($0.5 billion), which was down 32% from the second quarter of 2023 due to higher unit operating costs and lower realized steelmaking coal prices, somewhat offset by higher sales volumes.
The Copper segment’s net sales surged 87% year over year to CAD$1.37 billion ($1 billion), attributed to higher production offset by lower copper prices.
Total copper production was reported at a record 110,400 tons, 72% higher than the second quarter of 2023. Copper in concentrate production from QB was 51,300 tons in the second quarter, higher than 43,300 tons produced in the first quarter of 2024, reflecting the ongoing ramp up. Improved performances at Antamina and Highland Valley Copper were offset by lower output at Carmen de Andacollo due to the extreme drought conditions.
The segment’s gross profit jumped 94% year over year to CAD$397 million ($290 million) attributed to higher copper prices and sales volume, offset by the depreciation of QB assets.
The Zinc segment’s net sales were down 19% year over year to CAD$433 million ($316 million) as improved zinc prices were offset by lower sales volumes.
The segment’s gross profit marked a significant year-over-year drop of 80% to CAD$21 million ($15 million). This was caused by reduced refined metal sales and zinc premiums at Trail operations and lower sales volumes of zinc concentrate from Red Dog.
Cash Flow & Balance Sheet
Teck Resources generated a cash flow of CAD$1.3 billion ($1 billion), which was higher than the cash flow of CAD$1.13 billion ($0.8 billion) in the second quarter of 2023. The company had cash and cash equivalents of CAD$0.9 billion ($0.7 billion) at the end of the second quarter compared with CAD$0.7 billion ($0.5 billion) at the end of 2023. The debt was CAD$6.04 billion ($4.4 billion) at the end of the second quarter.
TECK returned around CAD$346 million ($252 million) to shareholders in the second quarter, through the purchase of CAD$282 million ($206 million) of Class B subordinate voting shares under its normal course issuer bid, and CAD$64 million ($47 million) as dividends.
Guidance
Copper production in 2024 is anticipated to be in the range of 435,000-500,000 tons, lower than the prior stated range of 465,000-540,000 tons. Zinc production is projected to be between 565,000 tons and 630,000 tons. Refined zinc output is estimated between 275,000 tons and 290,000 tons.
For the third quarter, the company expects sales of zinc in concentrate to be in the range of 250,000-290,000 tons at Red Dog.
Copper net unit costs are expected to be in the range of $1.90 -$2.30 per pound. Zinc net cash unit costs are projected between 55 cents and 65 cents.
Details of the Steelmaking Coal Unit Sale
On Nov 13, 2023, Teck Resources announced that it agreed to sell its steelmaking coal business. Glencore (GLNCY - Free Report) agreed to acquire the majority stake (77%). Nippon Steel Corporation agreed to take up 20% and the remaining 3% stake was to be taken up by POSCO (PKX - Free Report) .
On Jan 3, 2024, Nippon Steel fulfilled its part of the deal in exchange for its prior 2.5% interest in Elkview Operations and a payment of $1.3 billion in cash to Teck Resources on closing. Nippon Steel had also agreed to pay $0.4 billion to Teck Resources out of cash flows from EVR. Also, on the same date, Posco exchanged its previous 2.5% interest in Elkview Operations and 20% interest in the Greenhills joint venture for a 3% stake in EVR. On July 11, Teck Resources completed the sale of the remaining stake to Glencore.
The $7.3 billion proceeds will be used to pay down debt, return cash to shareholders and invest in growing TECK's copper portfolio.
TECK’s board has authorized up to a $2.75 billion share buyback and approved payment of an eligible dividend of 62.5 cents per share, including a 50 cents per share supplemental dividend. This will be payable on Sep 27, 2024, to shareholders of record on Sep 13, 2024.
Combined with the previous $500 million authorization announced in February, total cash returns to shareholders of $3.5 billion from the sale of the steelmaking coal business have been authorized.
Price Performance
The company’s shares have gained 7.2% in the past year against the industry’s 6.9% decline.
Image Source: Zacks Investment Research
Zacks Rank
Teck Resources currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Peer Performance
Freeport-McMoRan Inc. (FCX - Free Report) reported adjusted EPS of 46 cents in the second quarter, which topped the Zacks Consensus Estimate of 39 cents. The bottom line was 31% higher than the year-ago quarter’s EPS of 35 cents. Including one-time items, earnings were 42 cents per share, up around 83% from 23 cents per share in the year-ago quarter.
Revenues rose roughly 15% year over year to $6,624 million. The figure surpassed the Zacks Consensus Estimate of $5,985.9 million. The company witnessed higher copper and gold prices in the quarter, which helped offset the impact of lower sales volumes.