Arch Coal Inc.
), one of the largest coal producers in the U.S., operating 23
mines across the major low-sulfur coal basins of the country, is
slated to release its third-quarter 2012 earnings result before
the market bell on October 26, 2012.
Recap, Second Quarter-2012
Arch Coal reported a mixed overall performance in the second
quarter of 2012 posting a net adjusted loss of 10 cents per
share, narrower than the Zacks Consensus Estimate of a loss of 18
cents per share and lower than the year-ago earnings of 44 cents.
Plummeting sales volume related to decline in shipments from
Powder River Basin ("PRB") operations was responsible for the
Although the company recorded a steep plunge in coal sales of
14.2%, a year-over-year hike of 15.3% in the sales price per ton
spurred the top-line in the second quarter 2012. Total revenue
increased by 8% to $1,063.5 million from $985.5 million in the
year-ago quarter. Moreover, revenue surpassed the Zacks Consensus
Estimate of $1,020.0 million.
For 2012, the company expects to sell 135.5-141.5 million tons
of coal, which includes 128 - 134 million tons of thermal coal
and 7.5 million tons of metallurgical coal. Arch Coal's capital
expenditure in 2012 will likely be in the range of $410 - $430
The Zacks Consensus Estimate for the third quarter 2012 stands
at a pro forma loss of 15 cents per share, down 283.13% from
earnings of 8 cents reported in the comparable quarter, last
year. At present, the Zacks Consensus Estimate ranges from a loss
of 33 cents to a loss of 3 cents per share.
For full year 2012, the Zacks Consensus Estimate is at a loss
of 47 cents per share, lower than its previous year-end earnings
of $1.07 per share. The current Zacks Consensus Estimate ranges
between a loss of 74 cents and 30 cents per share.
Estimate Revisions Trend
We see considerable estimate revisions at this point. Among
the 20 estimates, 1 estimate moved in the upward direction while
3 estimates were revised downwards in the past 30 days for the
third quarter. For the said quarter, 1 lone estimate went down in
the last 7 days.
For 2012, out of a total of 19 estimates, 1 moved up and 5
trended down over the last month. The past 7 days saw 2 estimates
moving south for 2012.
The Zacks Consensus Estimate for the third quarter remained
unchanged in the last week. However, the estimate declined by a
penny to (15 cents) from (14 cents) in the past month. For full
year 2012, the consensus estimate declined by 3 cents in the past
30 days and by a cent in the last 7 days.
With respect to earnings surprises, Arch Coal Inc. has
reported unfavorable earnings performance in all of the last four
quarters with the second quarter 2012 result being narrower than
the corresponding Zacks Consensus Estimate. The earnings surprise
in the last four quarters ranges from (123.53%) to 44.44%. The
average surprise over the last four quarters remained a negative
Arch Coal Inc.'s coal prospects look promising as import
demand for coal from the Asian, European and Middle Eastern
markets is anticipated to steadily increase in the coming
quarters. In addition, the company's staunch effort in deploying
capital to its main operations from the idle ones, maintenance of
financial discipline and lesser coal mining cost in the US would
help strengthen its future business targets.
However, these positives could be muted by environmental
obligations, unexpected increase in costs of input supplies and
political risks associated with the company's overseas
ARCH COAL INC (ACI): Free Stock Analysis
PEABODY ENERGY (BTU): Free Stock Analysis
CONSOL ENERGY (CNX): Free Stock Analysis
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Arch Coal operates in a highly competitive energy market and
faces stiff opposition from companies like
Consol Energy Inc.
Peabody Energy Corp.
Currently, we are maintaining a long-term Neutral recommendation
on Arch Coal Inc. The company has a Zacks #3 Rank implying a
short-term Hold rating on the stock.