Arch Coal Inc.
) is set to release its third quarter financial results before
the market bell on Oct 29, 2013. The prior quarter saw the coal
operator making a comeback with a positive earnings surprise of
9.38%. Arch Coal currently retains a Zacks Rank #3 (Hold). Let's
see how things are shaping up at the company prior to this
Factors to Consider this Quarter
With coal market challenges still plaguing Arch Coal's
performance, we believe its focus on capital expenditure cuts and
cost curtailment will keep margins stable in the quarter. The
company's non-core asset divestiture strategy like the sale of
the Canyon Fuel subsidiary has helped to streamline
In addition, Arch Coal's strategy of steering resources to
widen its Powder River Basin coal customer base will continue to
fetch good returns.
However, as per the Energy Information Administration, U.S.
coal exports declined 7.6% in the first half of 2013 compared to
the corresponding period last year. Arch Coal's shipments will
also likely wane given the ongoing weakness in the Asian markets
of India, South Korea and Taiwan.
Any near-term improvement in the price of metallurgical coal
is not on the cards due to lingering oversupply issues in the
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 Zacks
(Expected Surprise Prediction) and a Zacks Rank #1, 2 or 3 for
this to happen. This is not the case here.
Negative Zacks ESP:
Earnings ESP, which represents the difference between the Most
Accurate estimate and the Zacks Consensus Estimate, is at
Zacks Rank #3 (Hold):
Arch Coal's Zacks Rank #3 (Hold) combined with an ESP of -13.33%
makes surprise prediction difficult. We caution against stocks
with Zacks Ranks #4 and 5 (Sell rated stocks) going into the
earnings announcement, especially when the company is seeing
negative estimate revisions.
Other Stocks to Consider
Here are some companies directly and indirectly related to the
coal industry which are worth considering on the basis of our
model. They have the right combination of elements to post an
earnings beat this quarter:
Alliant Energy Corp.
) has earnings ESP of +4.55% and carries a Zacks Rank #2
Great Plains Energy Inc.
) has earnings ESP of +3.26% and carries a Zacks Rank #2
James River Coal Company.
) has earnings ESP of +1.61% and carries a Zacks Rank #3
ARCH COAL INC (ACI): Free Stock Analysis
GREAT PLAINS EN (GXP): Free Stock Analysis
JAMES RIVER CL (JRCC): Free Stock Analysis
ALLIANT ENGY CP (LNT): Free Stock Analysis
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