Peabody Energy Corp.
) will release its second quarter 2013 financial results before
the market bell on Jul 23, 2013. In the prior quarter, this coal
operator reported a positive earnings surprise of 64.29%. Peabody
currently has a Zacks Rank #4 (Sell). Let's see how things are
shaping up at Peabody prior to this announcement.
Factors to Consider This Quarter
The soft performance of the coal industry in 2012 lingered in the
first half of 2013. However, the demand for coal is likely
to pick up in the subsequent quarters with an increase in natural
In this commodity supply surplus environment mine operators are
selectively developing mines to cope with the slackness in
demand. This situation has prompted Peabody to lower its capital
expenditure for 2013 by nearly 50% from the 2012 level to a range
of $450 million to $550 million.
Peabody is also working to lower its operating expenses and has
undertaken cost saving initiatives. The cost savings could be
marginally offset by expenses involved in implementation of
longwall operations in Twentymile Mine, in Routt County, Colo.,
and in Wambo Mines in New South Wales, Australia.
However, there is some good news for the coal industry. The World
Steel Association projected nearly 3% year-over-year growth in
global steel usage in 2013 and 2014. Positive steel fundamentals
can drive the demand for Peabody's premium coal.
In addition, nearly 300 gigawatts of coal fired power units
will come on-line globally over the next five years. Since the
expansion will mainly take place in the developing economies
where production of coal is much lower than domestic demand, it
could open up new shipment opportunities for Peabody.
ALLIANCE RES (ARLP): Free Stock Analysis
PEABODY ENERGY (BTU): Free Stock Analysis
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Our proven model does not conclusively show that Peabody Energy
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
Positive Zacks ESP:
Earnings ESP, which represents the difference between the Most
Accurate estimate and the Zacks Consensus Estimate, is at +40.0%.
This is a leading indicator of a likely positive earnings
surprise for the shares.
Zacks Rank #4 (Sell)
: Peabody's Zacks Rank #4 complicates the forecasting power
making 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 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
Alliance Resource Partners LP
) has earnings ESP of +2.50% and carries a Zacks Rank #1 (Strong
Suncoke Energy Partners, L.P.
) has earnings ESP of +6.82% and carries a Zacks Rank #2 (Buy).
CONSOL Energy Inc.
) has earnings ESP of +21.05% and carries a Zacks Rank #3