Teck Resources (TSX:TECK.B) stock has been one of the most consistent performers in the last few years, as it continues to impress investors by delivering positive returns, despite broader market uncertainties. After rallying by 129% in the previous three years, Teck stock is up about 11% in 2023 so far to currently trade at $56.27 per share. By comparison, the TSX Composite benchmark has risen only 3.8% year to date.
Before we discuss whether Teck stock is a buy in August 2023 after its recently released quarterly results, let’s take a closer look at some key factors that have supported its rally in recent years.
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Teck Resources: Key positive factors
If you don’t know it already, Teck Resources is a Vancouver-headquartered steelmaking coal, copper, and zinc mining company with a market cap of $29.2 billion. The company generates more than half of its revenue from the steelmaking coal business, which accounted for nearly 58% of its total revenue last year. Geographically, its business is also well diversified, with China, Japan, South Korea, and the United States being its largest markets based on 2022’s revenue figures.
The year 2020 was a very challenging year for the entire mining industry due to the COVID-19-related restrictions. While the global pandemic also affected Teck’s mining operations across the globe and drove its 2020 earnings lower by 62.2% YoY (year over year), its continued focus on productivity optimization and on increasing copper production to keep investors’ optimism alive. These could be two key reasons why Teck stock rose 2.6% that year.
Despite continued macroeconomic challenges in 2021 and 2022, Teck’s financial performance pleasantly surprised investors with the help of a spectacular recovery in commodity prices. Its annual adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) continued to reach new records during these two years. In 2022, the Canadian miner reported an adjusted EBITDA of $9.6 billion, up 68% YoY. This justifies why its share prices advanced by nearly 42% in 2022 after rallying by 57.7% in the previous year.
Is Teck stock a buy now?
Clearly, Teck stock has outperformed many of its peers in the last three years, making it one of the most attractive stocks on the Toronto Stock Exchange to consider right now. But the main question is, can it continue its strong upward trend in the coming years? Well, there is no easy answer to that question.
In 2023 so far, the commodity markets have witnessed weakness, affecting the profitability of the entire mining industry. This is one of the key reasons why in the second quarter this year, Teck’s adjusted EBITDA slipped 55% from a year ago to $1.48 billion, as its quarterly revenue also dived by 39.2% YoY to $3.52 billion. And macroeconomic environment remains volatile, which can continue to hurt commodity prices further and affect Teck’s financial results in the near term.
Given these challenges, Teck might not be a great stock to buy for the short term. Nonetheless, if you’re looking for a TSX stock with a strong financial position and robust fundamental outlook for the long term, Teck stock could be a great buy on any dip in 2023, as its long-term outlook could remain largely unaffected by these short-term challenges.
