Walter Energy Inc. Earnings: Increased Costs Strains Margins as Profit Drops

Rising costs hurt Walter Energy Inc. (NYSE:WLT) in the most recent quarter as profit dropped from a year earlier.

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Walter Energy Earnings Cheat Sheet for the First Quarter

Results: Net income for Walter Energy Inc. fell to $40.6 million (65 cents per share) vs. $81.8 million ($1.53 per share) a year earlier. This is a decline of 50.4% from the year-earlier quarter.

Revenue: Rose 54.5% to $632 million from the year-earlier quarter.

Actual vs. Wall St. Expectations: Walter Energy Inc. fell short of the mean analyst estimate of 82 cents per share. It fell short of the average revenue estimate of $663.1 million.

Quoting Management: “Our first quarter results reflect sales of 2.4 million metric tons (MMTs) of met coal and were in line with the latest outlook we provided. However, when compared with prior periods, the first quarter reflects reduced profitability,” said Walt Scheller, Chief Executive Officer. “First-quarter met coal production of three MMTs was better than our outlook for 2.8 to 2.9 MMTs and set a new quarterly record. I am particularly pleased that consolidated cash costs per ton of hard coking coal (NYSE:HCC) have improved 12 percent when compared with the fourth quarter of 2011. Walter is on target to achieve our production targets while continuing to focus on further cost reductions.”

Key Stats:

The company has now seen net income fall in each of the last four quarters. In the fourth quarter of the last fiscal year, net income fell 8.8% while the figure fell 44% in the third quarter of the last fiscal year and 7.6% in the second quarter of the last fiscal year.

For two quarters in a row, the company has come in under analyst estimates. In the fourth quarter of the last fiscal year, it missed expectations by 23 cents with net income of $1.40 versus a mean estimate of net income of $1.63 per share.

Looking Forward: Over the past ninety days, the average estimate for the second quarter has fallen from $1.41 per share to 84 cents, indicating that analysts are growing pessisimistic about the company’s performance next quarter. At $4.20 per share, the average estimate for the fiscal year has fallen from $6.49 ninety days ago.

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

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