Why Analysts Turned Bearish on TECK after Its 4Q16 Earnings



Analyst ratings

According to consensus estimates compiled by Thomson Reuters, Teck Resources (TECK) (TCK) has a mean one-year price target of 34.81 Canadian Dollars (or CAD), or ~$26.59, representing a 20.8% upside over its closing price on February 24, 2017. In contrast, TECK carried a one-year price target of CAD 35.52 (~$27.13) on February 14, one day before its 4Q16 earnings release.

While analysts have cut TECK’s price target after its 4Q16 earnings, they have raised Southern Copper’s (SCCO) and Freeport-McMoRan’s (FCX) price targets after their respective 4Q16 earnings.

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Analysts’ action

On February 16, Canaccord Genuity cut TECK’s target price from CAD 43 (~$32.84) to CAD 39.5 (~$30.17). BMO also cut Teck Resources’ target price from CAD 43 (~$32.84) to CAD 40 ($30.55). However, Paradigm Capital raised Teck Resources’ price target from CAD 34 (~$25.97) to CAD 42 (~$32.08) on the same day. More recently, on February 23, RBC cut Teck Resources’ price target to CAD 38 (~$29.02) from CAD 40 (~$30.55). On February 24, Barclays also cut TECK’s price target from CAD 36 (~$27.5) to CAD 34 (~$25.97).

Out of the 20 analysts polled by Thomson Reuters, 13 rate Teck Resources’ stock as a “buy” or equivalent. Only two analysts have rated the stock as a “sell” or equivalent, while the remaining five analysts rate Teck Resources as a “hold.”

4Q16 earnings

Teck Resources managed to post better-than-expected 4Q16 earnings. Higher coking coal and zinc prices were the key drivers of TECK’s 4Q16 profitability. However, the stock still saw selling pressure after its 4Q16 earnings release as markets seem concerned over Chinese coal demand (WLB) (KOL).

In the next article, we’ll look at analyst ratings and target prices for Glencore (GLNCY).


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