Arch Coal Inc
) will release its first quarter 2013 financial results before
the market opens on Apr 23, 2013. In the prior quarter, this coal
operator reported a negative earnings surprise of 200.0%. Arch
Coal currently has a Zacks Rank #3 (Hold). Let's see how things
are shaping up at Arch Coal prior to this announcement.
Factors to Consider This Quarter
The soft performance of the coal industry in 2012 is expected to
linger in the first quarter of 2013 and demand for coal is likely
to pick up in the subsequent quarters with the expected increase
in natural gas prices.
This company generated 36% of its coal revenues from 10 large
customers among which 3 accounted for 16% of total coal revenue
in 2012. Arch Coal is presently negotiating sales agreement with
some of these customers. If the company fails to enter into a
favorable contract it can weigh heavily on its profitability.
Slackness in thermal coal demand had prompted Arch Coal to shut
down four mines and temporarily idle a mine in 2012. The
global thermal coal market is expected to recover in 2013, driven
by demand primarily from Asian countries. This can benefit Arch
Coal as thermal coal accounted for the majority of its coal
However, the company will have to face stiff competition from
domestic as well as international thermal coal producers. In
addition, Arch Coal's operations may be hindered by limited port
capacity for shipment to international customers. These factors
could impact the volume of coal sales.
Accordingly, our proven model does not conclusively show that
Arch Coal is likely to beat earnings this quarter. That is
because a stock needs to have both a positive earnings Expected
Surprise Prediction (ESP) (Read:
Zacks Earnings ESP: A Better Method
) and a Zacks Rank #1, 2 or 3 for this to happen. This is not the
Negative Zacks ESP: This is because the Most Accurate
estimate stands at a loss of 33 cents while the Zacks
Consensus Estimate has a narrower loss of 32 cents, resulting in
Zacks Rank #3 (Hold): Arch Coal's Zacks Rank #3 with a negative
Zacks ESP complicates the forecasting power making surprise
Arch Coal registered a negative earnings surprise in the last
quarter. We caution investors against the stock going into the
Other Stocks to Consider
Here are some other companies tied to the coal industry worth
considering on the basis of our model, which shows that they have
the right combination of elements to post an earnings beat this
CONSOL Energy Inc
) has earnings ESP of +15.79% and carries a Zacks Rank #3 (Hold).
Alpha Natural Resources Inc.
) has earnings ESP of +3.39% and carries a Zacks Rank #3 (Hold).
American Electric Power Company Inc
) has earnings ESP of +2.74% and carries a Zacks Rank #3
ARCH COAL INC (ACI): Free Stock Analysis
AMER ELEC PWR (AEP): Free Stock Analysis
ALPHA NATRL RES (ANR): Free Stock Analysis
CONSOL ENERGY (CNX): Free Stock Analysis
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