Teck Resources Ltd.’s share price is with an incredible run. It is up a lot more than 80 percent because the company reported earnings on Feb. 11, and most 150 per cent since bottoming in mid-January. Copper costs are up only modestly in that period.
National Bank analyst Shane Nagle thinks enough is sufficient. He downgraded the stock to underperform from sector perform, though he did increase his target price to $8 a share (from $6.25) to match some multiple expansion.
Nagle said the stock has become in a substantial premium to its trading range in the last 3 years, and appearance to become pricing in “at least” a 10-per-cent rise in base metal prices.
That said, he does see reason to be optimistic about Teck beyond improving market sentiment. He noted the Vancouver-based miner’s cost-cutting initiatives have paid off, and, unlike a number of its rivals, it can handle its debt obligations.
Nagle also asserted Teck is well-positioned to boost more capital from asset sales. That would alleviate some investor concerns concerning the company’s high debt and it is $2.9-billion resolve for the Fort Hills oil sands project.
“Operating cost reductions continue to impress and many levers are for sale to the company to create capital, including non-core asset sales” he said inside a note.
