James River Coal Co. Earnings Cheat Sheet: Margins Suffer as Costs Rise

Increasing costs did not help James River Coal Company (NASDAQ:JRCC) in the third quarter as the company reversed to a loss. James River Coal Company mines, processes and sells bituminous, steam- and industrial-grade coal through six operating subsidiaries located throughout eastern Kentucky and one in southern Indiana.

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James River Coal Company Earnings Cheat Sheet for the Third Quarter

Results: Reported a loss of $3.7 million (11 cents per diluted share) in the quarter. The industrial metals and minerals company had net income of $9.2 million or 33 cents per share in the year earlier quarter.

Revenue: Rose 77.3% to $303.9 million from the year earlier quarter.

Actual vs. Wall St. Expectations: JRCC fell short of the mean analyst estimate of 17 cents per share. It fell short of the average revenue estimate of $337.2 million.

Quoting Management: Peter T. Socha, Chairman and Chief Executive Officer commented: “We were generally pleased with our progress this quarter. Obviously, we were disappointed to miss a couple of very valuable metallurgical coal shipments, but this was only an issue of timing not market conditions. Our operations team continues to successfully adjust our mines to the new regulatory environment. We were particularly pleased to receive several safety awards this quarter from both federal and state regulatory authorities. Lastly, we were pleased to complete several new metallurgical and thermal coal sales contracts during a period of market uncertainty.”

Key Stats:

Gross margin shrank 9.9 percentage points to 5%. The contraction appeared to be driven by increased costs, which rose 97.9% from the year earlier quarter while revenue rose 77.3%.

The company has now fallen short of analyst estimates for the last three quarters. It missed the mark by 17 cents in the second quarter and by 38 cents in the first quarter.

The company’s revenue has now risen for two straight quarters. In the second quarter, revenue increased 92.3% to $352 million from the year earlier quarter.

Looking Forward: Analysts appear increasingly negative about the company’s results for the next quarter. The average estimate for the fourth quarter has moved down from 80 cents a share to 10 cents over the last ninety days. The average estimate for the fiscal year is 52 cents per share, down from $1.95 ninety days ago.

Competitors to Watch: Alliance Holdings GP, L.P. (NASDAQ:AHGP), Intl. Coal Group, Inc. (NYSE:ICO), Peabody Energy Corporation (NYSE:BTU), Natural Resource Partners LP (NYSE:NRP), Arch Coal, Inc. (NYSE:ACI), Alliance Resource Partners, L.P. (NASDAQ:ARLP), Patriot Coal Corporation (NYSE:PCX), CONSOL Energy Inc. (NYSE:CNX), Colombia Clean Power & Fuels, Inc. (CCPF), and Walter Energy, Inc. (NYSE:WLT).

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