Arch Coal Inc. (ACI): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report
Arch Coal witnessed another lackluster quarter as milder summer temperature lowered demand for thermal coal. Arch's loss of 41 cents in the third quarter was wider than Zacks Consensus Estimate while top-line marginally surpassing the same. Going into the winter months, Arch Coal expects higher seaborne coal demand for power generation. Arch coal currently has no debt maturities until mid-2018 and hence it provides some financial flexibility to the company to find a way through current coal market downturns. However, the new EPA regulation might see shut down of domestic coal plant lowering demand for thermal coal. Currently, the low global coal prices and reduction of U.S. coal export opportunity due to supply glut in global coal market might have an adverse impact on the future prospects of the company. Hence, we retain our Neutral recommendation on the stock.
St. Louis, Mo.-based Arch Coal Inc. (ACI) is one of the largest coal producers in the U.S., operating 22 mines across major coal basins of the country. The company serves customers in over 20 countries. Arch Coal sells coal to power plants, steel mills and industrial facilities under long-term contracts. The company also owns a 42% interest in Knight Hawk Holdings, a coal producer in the Illinois Basin.
Arch Coal primarily conducts its business through three operating segments: Powder River Basin (PRB), having operations in Wyoming Appalachia (APP), having operations in Kentucky, Maryland, Virginia and West Virginia and Other, having coal mining operations in Colorado and Illinois.
Coals mined from the PRB region have very low sulfur content and low heat value. Bituminous coals usually have a low sulfur content and varying heat value. Appalachia produces coals, which have low sulfur content and high heat value. Metallurgical (met) coal has low sulfur content, high heat content, low expansion pressure and several other chemical properties.
During 2013, Arch Coal sold 140.7 million tons of coal, including around 2.8 million tons of coal sourced from third parties. At year-end 2013, the company had roughly 5.3 billion tons of met and thermal coal reserves.
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