Banking on higher metals prices

Thompson Creek Metals stands to benefit from recovering demand for molybdenum.

By Jim J. Jubak Feb 26, 2010 4:37PM

Jim JubakThompson Creek Metals (TC) announced earnings of 15 cents a share for the fourth quarter on Thursday after the market close. 


Revenue for the quarter came to $106 million. Both beat Wall Street projections for eight cents a share in earnings and $94 million in revenue.


Those numbers represent a 42% decline in revenue from the fourth quarter of 2008 and an 86% drop from earnings per share of 56 cents in that same quarter. 


These numbers are Thompson Creek's first financial report under U.S. accounting rules (required since more than 50% of the shares of the Canadian company are now owned by U.S. citizens). If the company were still reporting under Canadian accounting rules, earnings per share for the fourth quarter would have been 17 cents.


In its guidance, the company said that it continues to see signs of recovering demand for molybdenum in 2010. The company's mines are currently operating at full capacity and it expects molybdenum production in 2010 to reach a record 29 to 32 million pounds. Cash costs are expected to remain low, in a range of $6 to $7 a pound.


Now there's just the question of price. Currently molybdenum prices are near $17 a pound. At the end of 2009, the forecast was for $16 a pound in 2010. 


I think it's now reasonable to project the current price of $17 a pound for the year as a whole, even with the uncertainties about economic growth in the second half. But I am starting to see forecasts that call for higher prices in 2011 -- and in 2010.


As of Feb. 26, I'm going to raise my projection for molybdenum prices in 2010 to $17 and I'm taking my target price for shares of Thompson Creek to $18 by September 2010 from the current target of $17 by July (it traded below $14 Friday).


For more on why you want to own shares of industrial companies see my post on what sectors do best when in the economic cycle.


At the time of this writing, Jim Jubak owned shares of Thompson Creek Metals in his personal portfolio.

0Comments

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

133
133 rated 1
286
286 rated 2
441
441 rated 3
737
737 rated 4
614
614 rated 5
606
606 rated 6
621
621 rated 7
441
441 rated 8
317
317 rated 9
122
122 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
BBBYBED BATH & BEYOND INC10
TWXTIME WARNER Inc10
COPCONOCOPHILLIPS9
HDHOME DEPOT Inc9
VZVERIZON COMMUNICATIONS9
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.