CIBC World Markets analyst raised his price target on Teck Resources stock
Higher metallurgical coal prices have at least one analyst much more bullish on the outlook for Teck Resources Ltd. (TSE:TCK.B).
On Tuesday, the Canadian diversified miner updated its fourth quarter realized price expectations for the commodity, boosting its outlook to US$200-205 per tonne, from prior guidance that steered the market toward US$185.
This prompted CIBC World Markets analyst Alec Kodatsky to raise his price target on Teck shares to $44 from $33, while maintaining a sector outperformer rating.
“We believe this revised realized pricing figure is consistent with the application of historical quality-related price spreads,” Kodatsky told clients, adding that it also looks appropriate given Teck’s sale mix of 60 per cent contract and 40 per cent market-related prices.
“Coal pricing continues to remain stronger for longer than we anticipated, and in light of this, we are taking the opportunity to re-evaluate our coal price assumptions going forward,” the analyst said.
He now forecasts coking coal contracts for the first quarter of 2017 will settle at US$300 per tonne, representing a slight discount to the current spot price.
Kodatsky also noted that past price recoveries for the commodity (spikes in 2008 and 2011) point to a steady decline to US$185 in Q4 2017, and an average price of US$228 for 2017, up from US$135 previously.
As a result, the analyst’s 2017 cash flow per share forecast for Teck climbs to $8.76 from $5.44.
Read the full article at: business.financialpost.com
