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Why Analysts Expect Teck Resources’ Revenues to Surge in 4Q16

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Teck Resources’ 4Q16 revenues

According to data compiled by Thomson Reuters, analysts expect Teck Resources (TECK) (TCK) to post revenue of 3.4 billion CAD (Canadian dollars), or ~$2.6 billion, in 4Q16. In contrast, TECK posted revenue of nearly 2.1 billion CAD (~$1.6 billion) in 4Q15 and 2.3 billion CAD (~$1.7 billion) in 3Q16. Analysts expect Teck Resources’ 4Q16 revenue to rise on a yearly basis as well as on a quarterly basis.

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Production

The revenues of commodity producers (GLNCY) such as BHP Billiton (BHP), Southern Copper (SCCO), and Freeport-McMoRan (FCX) are intertwined with commodity prices and shipments. In 4Q16, Teck Resources expects to sell more than 6.5 million metric tons of coal. Looking at the company’s annual guidance, its 4Q16 copper production could be in the ballpark of 68,000 metric tons while zinc production could be ~155,000 metric tons.

In contrast, Teck Resources produced 7 million metric tons of coal, 79,000 metric tons of copper, and 158,000 metric tons of zinc in 3Q16. Teck Resources could report a sequential decline in 4Q16 production across all three commodities even if the company hits the upper end of its guidance.

Commodity prices

Nonetheless, higher commodity prices would more than compensate for any decline in Teck Resources’ 4Q16 production profile. We saw a sharp rally in copper and zinc prices in 4Q16 after Trump’s election as US president. Furthermore, we’ll also see the impact of higher coal prices in Teck Resources’ 4Q16 coal shipments.

Along with revenues, higher commodity prices would also support Teck Resources’ 4Q16 profitability. We’ll discuss this more in the next article.

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