Arch Coal Earnings: Burns Past Estimates, Shares Hot

Arch Coal Inc (NYSE:ACI) reported net income above Wall Street’s expectations for the third quarter. Arch Coal is a coal producer in the United States, that sells coal to power plants, steel mills, and industrial facilities.

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Arch Coal Inc Earnings Cheat Sheet

Results: Net income for Arch Coal Inc rose to $45.8 million (22 cents per share) vs. $8.9 million (4 cents per share) in the same quarter a year earlier. This marks a substantial increase from the year-earlier quarter.

Revenue: Fell 9.3% to $1.09 billion from the year-earlier quarter.

Actual vs. Wall St. Expectations: Arch Coal Inc reported adjusted net income of 20 cents per share. By that measure, the company beat the mean analyst estimate of a loss of 15 cents per share. It beat the average revenue estimate of $1 billion.

Quoting Management: “Arch’s third quarter performance reflects improvement over the second quarter due to our cost control efforts and modestly better domestic thermal markets driven by favorable summer weather and higher competing fuel prices,” said John W. Eaves, Arch’s president and chief executive officer. “During the third quarter, we saw margins in both of our western regions expand due to increased shipment levels, higher price realizations and strong cost control.” For the first nine months of 2012, Arch generated adjusted EBITDA of $617 million versus $651 million in the prior-year period. Revenues rose four percent to $3.2 billion year-to-date in 2012. Over this same time period, cash flow from operations totaled $356 million, while capital expenditures were $304 million, resulting in free cash flow of $52 million.”

Key Stats:

Last quarter marked the fifth straight quarter that the company saw shrinking gross margins, as gross margin fell three percentage points to 17.5% from the year-earlier quarter. In that span, margins have contracted an average of 5.6 percentage points per quarter on a year-over-year basis.

A year-over-year revenue decrease last quarter breaks a four-quarter streak of revenue increases. The best quarter in that span was the fourth quarter of the last fiscal year, which saw revenue rise 47.1%.

The company has beaten estiamtes for two quarters in a row. In the second quarter, it topped expectations with a loss of -10 cents versus a mean estimate of a loss of 18 cents per share.

Looking Forward: The outlook for the company’s next-quarter performance in increasingly unfavorable. Over the past sixty days, the average estimate for the fourth quarter has dipped to a loss of 15 cents per share from a loss of 12 cents. Down from a loss of 41 cents per share sixty days ago, the average estimate for the fiscal year is now a loss of 47 cents.

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(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

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