Teck Resources Cut At Goldman Sachs After Shares Climb

With Teck Resources Ltd (USA) (NYSE: TCK) shares having appreciated 74 percent since mid-May, as compared to the 7 percent increase in the S&P 500, Goldman Sachs’ Andrew Quail believes the stock valuation is no longer attractive at the current levels.

Quail downgraded the rating on the company from Buy to Neutral, with a price target of $13.

Premium Valuation

Although Teck Resources’ metal exposure is better than that of its peers, the analyst pointed out that the stock was currently trading at a 20 percent premium to peers.

Given the robust year to date rally in commodity prices and the “muted” Goldman Sachs price deck, Quail believes that there are better opportunities across the coverage universe.

Catalysts

“Overall we remain constructive on the outlook for TCK given its preferred metal mix exposure vs peers and positive organic growth opportunity at Fort Hills,” the analyst said.

Quail noted that the preferred metal exposure include higher exposure to China infrastructure than China property, as well as zinc and met coal over copper.

The analyst also mentioned the Teck Resources’ largest organic growth project, Fort Hills, was expected to start production in 4Q17 and expected to remain a catalyst for the company. The key would be the cost update, expected in late 2016.

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