With coal prices continuing to rise, Citi analyst Alexander Hacking hiked his 2022 earnings before interest, taxes, depreciation and amortization (EBITDA) projection for Teck Resources Ltd. (
) by 40 per cent on Thursday.
The move came in reaction to higher price forecasts from the firm’s global commodity team, including met coal at $365 per ton and copper at $4.60 per pound, as well as a “generally positive” conference call following the release of its quarterly results.
“It seemed virtually inconceivable 3 years ago that Teck could be reducing debt & returning capital whilst building QB2 but here we are thanks to coal prices,” said Mr. Hacking. “TECK stock responded very positively to results today although we did not see much that was new (maybe expectations had been lowered more than we realized). Executing QB2 is the key for 2022 with important work still to progress.”
Keeping a “buy” rating for Teck shares, which jumped 11.7 per cent on Wednesday, the analyst raised his target to $58 from $52. The average target is $59.46.
“Investment positives include a solid portfolio of mining assets including the world’s second biggest export met coal business; growth in copper; a strong balance sheet; increased capital returns in recent years. Negatives include risk of lower met coal demand in future; a history of questionable M&A and dual class share structure. On balance we see more upside than downside at current levels,” said Mr. Hacking.
Elsewhere, Barclays’ Matt Murphy trimmed his target to $54 from $55 with an “equal-weight” rating.