Over the course of the full year, the natural resources provider’s stock surged 450%. Teck’s boom was aided in large part by the rise of met coal, which started the year at $78 a tonne and peaked in mid-November at about $300 a tonne. In fact, it was only $92 a tonne in the third quarter before going up to $200 by mid-September. China’s cutting of production in inefficient mines helped met coal’s boom, but the substance’s price declined at the year’s end.
Teck shares lost 18% in December, but there’s no reason to fret as there is still a strong market for coal, which makes up about a third of the company’s business. Despite the recent price volatility of met coal prices, Teck is in a good position as last year helped put the company in a place where costs have been lowered and its balance sheet has improved due to lower debt levels.
Macquarie Group Ltd. analyst Matt Murphy raised Teck’s price target to $13 a share on Dec. 19, while increasing the company’s rating from a “Neutral” to an “Outperform.” The first-quarter benchmark price for the company’s highest-quality coal is now at $285 per tonne.
Another recent move that is helping position the company for improved success moving forward is a deal with unionized employees at Fording River, Elkview’s steel-making coal mines in British Columbia that will help bring stability to the company in the form of five-year collective agreements.
The free cash flow that Teck holds will help to offset the softening met coal prices. A number of analysts have raised their price target on the stock, including one analyst raising it from $30 to $40 a share, while another raised it from $27 a share to $41 per share.
Teck has received a boost from analysts as well as the company’s own financial expectations for its most recent quarter. Despite the weak December, current-quarter estimates have soared from $1.08 per share to $1.38 per share. Analysts are becoming more bullish on the company’s potential in both the short term and the long term.
Additionally, full-year expectations for the current year have gone from earnings of 94 cents per share to earnings of $1.58 per share. Zacks is calling the stock a “Strong Buy,” helping to further reinforce the strong analyst sentiment surrounding a stock that is still moving upwards as it continues to reap the benefits of the met coal price boom. Teck will post its fiscal fourth-quarter results on Feb. 15.
The incredibly strong 2016 has not quite ended for Teck as the company continues its path towards becoming debt-free and creating a better balance sheet for itself. This is a stock you must buy now before the momentum slows down for the company.