Commodities & Metals

Earnings Surprise Brings Coal Sector Back into Focus

Coal stack on white
Source: Thinkstock
Shares of Peabody Energy Corp. (NYSE: BTU) rose as much as 3.2% this morning after the company posted first-quarter earnings that were considerably better than expected. Peabody’s earnings per share (EPS) loss of $0.05 was a third of the expected net loss of $0.15 per share. Revenues came in a bit low, at $1.75 billion compared with a consensus estimate of $1.78 billion.

As the first of the U.S. coal miners to report — and the largest — Peabody’s results offer an opportunity to look at Alpha Natural Resources Inc. (NYSE: ANR), Arch Coal Inc. (NYSE: ACI), CONSOL Energy Inc. (NYSE: CNX), James River Coal Co. (NASDAQ: JRCC), Walter Energy Inc. (NYSE: WLT) and Cloud Peak Energy Inc. (NYSE: CLD). All these stocks are getting a boost today from Peabody’s results.

In its press release, Peabody noted a decline in Australian pricing in the quarter, but a rise in shipments. U.S. revenues were down 12% on a 6% drop in shipments. But Peabody expects a change going forward.

For the remainder of 2013, Peabody expects coal to recapture the “majority” of the demand it lost to natural gas in 2012. Rising U.S. prices for natural gas have returned coal to is low-cost status as a fuel for power generation. Demand from coal-fired plants rose 15% in March, while natural gas demand fell by 16%.

Given Peabody’s surprising results, a look at the other coal miners might provide some insight into the sector ahead of more earnings reports. Unlike Peabody, none of these firms has Australian operations to figure into the equation.

Alpha Natural Resources is expected to post an EPS loss of $0.59 on revenues of$1.32 billion. The company’s expected loss has narrowed from $0.67 three months ago, but given Peabody’s drop in shipments, Alpha’s revenue, projected to drop more than 30% year-over-year in the first quarter, could be weaker than expected. Alpha reports earnings on May 1.

The consensus first-quarter estimates for Arch Coal calls for an EPS loss of $0.34 on revenues of $912.03 million. The expected loss has widened from $0.30 in the past three months, and the revenue estimate is 12% lower than last year’s first quarter total. Arch reports earnings next week.

CONSOL Energy is expected to post first-quarter EPS of $0.18 on revenues of $1.25 billion. The EPS estimate has come down $0.02 in the past three months, and the estimated EPS is way down from $0.42 in the same period a year ago. CONSOL has been somewhat insulated from the harsh treatment for coal because the company also produces natural gas and some liquids. CONSOL reports results next week.

James River is expected to post an EPS loss of $1.63 on revenues of $192.64 million when it reports earnings on April 29. Revenues are expected to be nearly a third lower than a year ago and EPS is more than three times worse. Analysts expect little from James River this quarter, and it is very likely the company will deliver on those expectations.

Walter Energy is expected to post an EPS loss of $0.88 on revenues of $505.55 million when it reports on earnings on May 1. Expectations have fallen from an EPS loss of $0.48 just three months ago. In the first quarter a year ago, Walter Energy posted EPS of $0.65.

Cloud Peak reports earnings on April 30 and is expected to post EPS of $0.28 on revenues of $353.29 million. Revenues are expected to be down more than 5% year-over-year, and EPS expectations to have fallen from $0.37 just three months ago. Over the past 12 months, however, Cloud Peak is the only one of these companies to put up share price growth. Shares are up about 34%, compared to a drop of 70% at Walter, 64% at James River, 55% at Alpha, 49% at Arch, 27% at Peabody and about 5% at Consol.

Peabody’s shares are up 9% just before noon today, at $20.43 in a 52-week range of $18.56 to $31.97.

Alpha’s shares are up 5.3%, at $7.21 in a 52-week range of $5.28 to $17.30.

Arch’s shares are up 8.8%, at $4.95 in a 52-week range of $4.47 to $10.26.

CONSOL’s shares are up 4.4%, at $32.70 in a 52-week range of $26.41 to $37.39.

James River’s shares are up 6.8%, at $1.74 in a 52-week range of $1.46 to $5.89.

Walter Energy’s shares are up 2.2%, at $18.95 in a 52-week range of $18.21 to $69.41.

Cloud Peak’s shares are up 4.3%, at $18.95 in a 52-week range of $13.65 to $22.31.

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