Arch Coal Earnings Preview

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Arch Coal (NYS: ACI) came in under analyst's estimates last quarter, but now have a chance to fix things this quarter. The company will unveil its latest earnings on Friday. Arch Coal is a coal producer in the United States, that sells coal to power plants, steel mills, and industrial facilities.

What analysts say:

  • Buy, sell, or hold?: The majority of analysts back Arch Coal as a buy. But with 55% of analysts rating it a buy, Arch Coal is still below the mean analyst rating of its nearest 10 competitors, which average 62.4% buys. Analysts don't like Arch Coal as much as competitor Alliance Holdings GP overall. Two out of three analysts rate Alliance Holdings GP a buy compared to 11 of 20 for Arch Coal. While analysts still rate the stock a moderate buy, they are a little more optimistic about it compared to three months ago.
  • Revenue forecasts: On average, analysts predict $1.3 billion in revenue this quarter. That would represent a rise of 55.6% from the year-ago quarter.
  • Wall Street earnings expectations: The average analyst estimate is earnings of $0.31 per share. Estimates range from $0.21 to $0.48.

What our community says:
CAPS All-Stars are strongly backing the stock, with 97.7% awarding it an outperform rating. Most of the community concurs with the All-Stars, with 96.1% granting it a rating of outperform. Fools have embraced Arch Coal and haven't been shy with their opinions lately, logging 445 posts in the past 30 days. Even with a robust four out of five stars, Arch Coal's CAPS rating falls a little short of the community's upbeat outlook.

Management:
Arch Coal's income has fallen year-over-year by an average of 78.7% over the past five quarters. The company's gross margin shrank by 5 percentage points in the last quarter. Revenue rose 37% while cost of sales rose 46.2% to $952.9 million from a year earlier.

Now let's look at how efficient management is at running the business. Traditionally, margins represent the efficiency with which companies capture portions of sales dollars. Arch Coal's net margins, which reflect what percentage of revenue becomes profit, have dropped year-over-year in the last two quarters. Here are Arch Coal's reported margins for the last four quarters:

Quarter

Q3

Q2

Q1

Q4

Gross Margin

20.5%

27.9%

25.1%

25.5%

Operating Margin

7.7%

10.4%

11.7%

10.4%

Net Margin

1.6%

1.1%

6.4%

5.7%

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Earnings estimates provided by Zacks.

At the time this article was published

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