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Arch Coal's Q3 Loss Narrower than Estimates, Revenues Beat

Arch Coal Inc.ACI reported a third-quarter 2015 adjusted loss of $3.38 per share, narrower than the Zacks Consensus Estimate of a loss of $5.91 and the year-ago loss of $4.52 per share.

Arch Coal Inc. - Earnings Surprise | FindTheBest

GAAP loss in the quarter was $93.91 per share compared with a loss of $4.58 per share in the year-ago period. The wide difference between the GAAP and operating numbers were due to a $2.1 billion asset impairment charge during the quarter and $149 million of losses related to the bankruptcy of Patriot Coal.

Total Revenue

In the third quarter of 2015, Arch Coal's total revenues of $689 million surpassed the Zacks Consensus Estimate of $678 million by 1.6%. However, the decline in the average sales price per ton and sales volume led to a 7.1% year-over-year decrease in revenues.

Operational Update

In the quarter under review, Arch Coal's sales volume decreased 0.9% year over year to 34.8 million tons primarily due to lower sales from its Appalachian operations, while sales volume from its Powder River Basin improved marginally.

Average sales price per ton decreased 7.6% to $18.45 from $19.97 a year ago.

In the third quarter, cost of sales was down 16.5% year over year to $540.2 million and selling, general and administrative expenses declined 8.9% to $25.7 million. Net interest expenses were $99.1 million, 2.9% higher than the prior-year period.

Arch Coal reported earnings before interest, taxes, depreciation and amortization of $134.8 million, up 87.4% from $71.9 million a year ago.

Financial Update

Cash and cash equivalents as of Sep 30, 2015 were $494.8 million compared with $734.2 million as of Dec 31, 2014.

Long-term debt as of Sep 30, 2015 was $5,108.5 million compared with $5,123.5 million as of Dec 31, 2014. Capital expenditure in the first nine months of 2015 was $109.3 million, down from $118.7 million incurred in the year-ago period.

Guidance

Arch Coal maintained its thermal coal sales guidance for 2015 of 120-124 million tons and retained its metallurgical coal sales guidance of 6.0-6.8 million tons.

Arch Coal's capital expenditure for 2015 will be in the range of $120-$130 million.

Other Coal Releases

Peabody Energy Corporation BTU reported a loss of $8.13 per share in third-quarter 2015, narrower than the Zacks Consensus Estimate of a loss of $8.20.

CONSOL Energy Inc. CNX reported an adjusted loss of 28 cents per share for the third quarter of 2015, much wider than the Zacks Consensus Estimate of a loss of 2 cents.

Westmoreland Coal Co. WLB reported a loss of $1.20 per share in the third quarter of 2015, much wider than the Zacks Consensus Estimate of a loss of 63 cents.

Our View

Arch Coal's performance in the third quarter was better than expected, but that does not mean everything is going well in the coal industry. Actually, the prospects of the coal industry are weaker in 2016 compared with 2015 levels.

Low natural gas prices , record high natural gas inventories, weak electric power demand and multiple coal plant closures stemming from the implementation of new environmental regulation are expected to bring down the demand for coal in the U.S. Arch Coal expects thermal coal consumption to decline by 95 million tons during 2015.

Arch Coal currently carries a Zacks Rank #3 (Hold).

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CONSOL ENERGY (CNX): Free Stock Analysis Report

ARCH COAL INC (ACI): Free Stock Analysis Report

PEABODY ENERGY (BTU): Free Stock Analysis Report

WESTMORELAND CO (WLB): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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