TAKING THE PULSE: The coal industry has seen a resurgence of late as export demand continues to grow abroad and U.S. coal miners look to expand in new market segments. Consolidation has picked up in the sector as major firms like Alpha Natural Resources Inc. (ANR) and Arch Coal Inc. (ACI) seek control of reserves of metallurgical coal used to make steel. Negotiations for a stake in untapped Mongolian reserves could give Peabody Energy Corp. (BTU) increased access to growing Asian markets.
Meanwhile, analysts at Goldman Sachs last month predicted shares of coal companies would rise by 35% on average over the next six months as inventories of thermal coal used to generate electricity return to normal levels.
COMPANIES TO WATCH:
Peabody Energy Corp. - reports July 19
Wall Street Expectations: Analysts polled by Thomson Reuters most recently projected earnings of $1.05 a share and revenue of $2.02 billion, on average. In the year-earlier period, Peabody posted earnings of 76 cents a share, or 69 cents excluding tax adjustments, on revenue of $1.66 billion.
Key Issues: The largest U.S. coal producer by output posted a first-quarter profit on higher prices in Australia and strong U.S. shipment volumes, but faces production constraints and rising costs. Continued complications from flooding in Australia that disrupted international supplies earlier this year are expected to be a drag on earnings. Peabody recently made a joint bid with ArcelorMittal (MT, MT.AE) to acquire Australian coal miner Macarthur Coal Ltd. (MCC.AU) that values the company at more than $5 billion after Peabody made four separate offers for Macarthur last year. Peabody's position in Australia has given it a competitive advantage as it seeks to expand sales to the booming Chinese and Indian markets. The mining company is in negotiations with the Mongolian government to develop the Tavan Tolgoi coal mine, one of the world's largest untapped coal deposits, highlighting its international advantage over its rivals.
Alpha Natural Resources - reports Aug. 3
Wall Street Expectations: Analysts project earnings of $1.16 a share on revenue of $1.45 billion. In the year-earlier period, Alpha reported a profit of 32 cents a share on revenue of $1 billion. Excluding the impact of acquisitions and other items, earnings from continuing operations were 62 cents a share.
Key Issues: Alpha bought rival Massey Energy Co. last month for $7.1 billion, making the combined company the world's third-largest producer of metallurgical coal. Alpha will inherit extensive reserves of the high-margin coal as well as several lawsuits related to the explosion at Massey's Upper Big Branch mine in West Virginia that killed 29 workers last year. Though Alpha has diversified its operations and increased the company's metallurgical coal exposure through its recent acquisition, Standard & Poor's said last month that the rising costs and operational pressures at the Massey's operations will create integration challenges.
Consol Energy Inc. (CNX) - reports July 28
Wall Street Expectations: Analysts forecast Consol Energy to post earnings of 70 cents a share on revenue of $1.36 billion. Last year, the company recorded a profit of 29 cents a share, including 16 cents in charges, on revenue of $1.29 billion.
Key Issues: After a year of sliding profits, the company posted a first-quarter profit on higher-than-expected coal production and surging prices. The company continues to focus on natural gas production, announcing last month it would close one of its idled Western Pennsylvania coal mines to focus on more profitable coal and Marcellus shale gas operations. Moody's, which raised its outlook on Consol earlier this month, said higher steam-coal prices have allowed the company a stronger-than-expected cash flow following its $3.47 billion acquisition of the gas operations of Dominion Resources Inc. last year.
Arch Coal Inc. - report expected July 29
Wall Street Expectations: Analysts project Arch to post earnings of 61 cents a share on revenue of $947 million. Last year, Arch reported earnings of 41 cents a share, or 43 cents excluding charges, on revenue of $764.3 million.
Key Issues: Arch acquired International Coal Group Inc. last month, a move that gives Arch a presence in every major U.S. coal production region and expands the company's reserves of metallurgical coal. In April, the company issued a stronger forecast for its annual metallurgical coal sales as shipments to international markets rise.
(The Thomson Reuters financial estimates and year-earlier figures may not be comparable due to one-time items and other adjustments.)
-By Nathalie Tadena, Dow Jones Newswires; 212-416-3287; email@example.com