Arch Coal Inc.
) is set to report its fourth-quarter and full-year 2012 results
on Feb 5, 2013. Last quarter, the company reported a positive
surprise of 233.3%. Let's see how things are shaping up prior to
Factors to Consider This Quarter
The year 2012 was dull for the coal industry as the coal
companies continue to face challenges from the rising utilization
of alternate energy for electricity generation, higher
competition from natural gas producers, production curtailment in
the manufacturing sector and compliance with rising government
rules, which increased the costs of operations. Like other coal
producers, Arch Coal is experiencing a similar situation.
In addition, we are skeptical about the weak metallurgical coal
scenario. Arch Coal could face challenges in terms of lower
pricing due to weak demand from the Asian and European market, as
it experienced during the third quarter of 2012.
However, we are optimistic about Arch Coal's continuous efforts
toward cost control as well as the chances of improvement of
thermal coal demand in the U.S. domestic market, which may boost
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 ESP (Read:
Zacks Earnings ESP: A Better Method
) and a Zacks Rank of #1, 2 or 3 for this to happen. This is not
the case here as you will see below.
Negative Zacks ESP:
This is because the Most Accurate estimate stands at a
loss of 19 cents, while the Zacks Consensus Estimate is pegged at
a loss of 14 cents. This comes to a difference of -35.71%.
Zacks Rank #3 (Hold):
Arch Coal Inc. with Zacks Rank #3 (Hold), enhances the
possibility of an earnings surprise. However, the Zacks Rank #3
when combined with a negative ESP makes surprise prediction
difficult. We also caution against stocks with Zacks Ranks #4 and
#5 (Sell rated stocks) going into the earnings announcement,
especially when the company is experiencing negative estimate
Other Stocks to Consider
Here are some other companies from the sector you may want to
consider as our model shows that these have the right combination
of elements to post an earnings beat this quarter:
TECO Energy, Inc.
) has Earnings ESP of +14.29% and Zacks Rank #3 (Hold)
Otter Tail Corporation
) has Earnings ESP of +6.67% and Zacks Rank #3 (Hold)
) has Earnings ESP of + 6.52% and Zacks Rank #3 (Hold)
ARCH COAL INC (ACI): Free Stock Analysis
OTTER TAIL CORP (OTTR): Free Stock Analysis
PPL CORP (PPL): Free Stock Analysis Report
TECO ENERGY (TE): Free Stock Analysis Report
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