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Arch Coal (ARCH) Q1 Loss Wider Than Expected, Sales Beat

Arch Coal Inc. ARCH reported first-quarter 2020 operating loss of $1.67 per share, wider than the Zacks Consensus Estimate of a loss of $1.21.
 
Total Revenues

Total revenues in the reported quarter amounted to $405.2 million, which beat the Zacks Consensus Estimate of $387 million by 4.7%. However, the figure declined 27% on a year-over-year basis due to lower sales volumes, and reduction in cash sales price per ton in Metallurgical and Other Thermal segments.

Segment Details

In the Metallurgical segment, the company sold 1.8 million tons of coal, in line with the prior-year figure. It recorded cash margins of $23.93 per ton compared with $50.95 in the year-ago quarter, owing to lower sales price.

During the quarter, the Powder River Basin segment’s cash margin per ton was (13 cents) versus $1.20 in the prior-year period. The company sold 14.2 million tons, down from the year-ago figure of 17.1 million tons.

In the Other Thermal segment, its cash margin was ($2.29) per ton versus $3.30 in the prior-year period. Shipments also declined 58.7% year over year to 0.7 million tons.

Arch Coal Inc. Price, Consensus and EPS Surprise

Arch Coal Inc. price-consensus-eps-surprise-chart | Arch Coal Inc. Quote

Highlights of the Release

During the first quarter, Arch Coal invested $62.1 million in the Leer South mine development and expects to invest $220 million in the same in 2020. Total capex for Leer South is projected between $360 million and $390 million. The company is on track to commence longwall operations at the mine in third-quarter 2021. This mine will produce very high quality coking coal, which will allow it to cater to rising demand globally.

During the first quarter, the company further strengthened its liquidity position with the completion of a four-year, $54-MILLION equipment financing facility. The company ended the first quarter with $323 million of liquidity.

Financial Highlights

Cash and cash equivalents as of Mar 31, 2020 were $105.2 million compared with $153.1 million at the end of 2019.

Long-term debt as of Mar 31, 2020 was $330.1 million compared with $290.1 million at the end of 2019.

Cash provided by (used in) operating activities in first-quarter 2020 was ($12.1) million versus $84.9 million in the year-ago period.

Guidance

Arch Coal expects coking coal volume and total sales volume for 2020 to be 5.9 and 69 million tons, respectively. The company has downwardly revised its capital expenditure guidance for 2020 by $20 million to the range of $280-$300 million, primarily due to lower spending on thermal operations.

Zacks Rank

Arch Coal currently carries a Zacks Rank #5 (Strong Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Upcoming Releases

Alliance Resource Partners ARLP is scheduled to report first-quarter 2020 results on May 4. The Zacks Consensus Estimate for earnings for the quarter is pegged at 13 cents per share.

Peabody Energy Corporation BTU is set to report first-quarter 2020 results on Apr 29. The Zacks Consensus Estimate for the to-be-reported quarter’s bottom line is pegged at a loss of 92 cents per share.

CONSOL Energy Inc. CEIX is slated to report first-quarter 2020 results on May 11. The Zacks Consensus Estimate for earnings for the quarter to be reported is pegged at $1.1 per share.

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