Arch Coal Snips Guidance - Analyst Blog

Coal producer Arch Coal Inc. (ACI) lowered its earnings expectation for 2010 due to lower shipment levels and geological challenges impacting its Mountain Laurel operation.

The company presently expects its operating earnings per share for 2010 in the range of $1.11–$1.15, down from the previous guidance of $1.25–$140 provided during the third quarter 2010 earnings release.

Earnings per share, on a GAAP basis, for 2010 are expected in the range of 94 cents – 98 cents, down from the prior range of $1.09–$1.23. The new guidance includes the impact of amortization of coal supply agreements and early debt extinguishment costs.

The Zacks Consensus Estimates for fourth-quarter 2010, fiscal year 2010 and fiscal year 2011 are 51 cents per share, $1.17 per share and $2.74 per share, respectively.

The company also lowered its adjusted earnings before interest, taxes, depreciation, depletion and amortization (EBITDA) guidance to a range of $718−$726 million from the previous range of $750−$790 million.

Arch Coal expects geological factors to continue to impact the longwall at Mountain Laurel forcing it to remain idle during most of the first quarter of 2011. Despite the temporary longwall outage, Arch expects to achieve coking and pulverized coal injection shipments of at least 7 million tons from its Central Appalachian operations during 2011.

The company's peer, Peabody Energy Corporation (BTU), also lowered its 2010 earnings forecast due to heavy rains and flooding in Australia, which accounts for one-third of the company's net revenue. Peabody presently expects its 2010 EBITDA to range from $1.7 billion to $1.9 billion versus its revised October 2010 EBITDA guidance of $1.85 billion to $1.9 billion.

Arch Coal currently retains a Zacks #3 Rank (short-term Hold rating). We presently maintain a Neutral rating on the stock.

Based in St. Louis, Missouri, Arch Coal engages in the production and sale of steam and metallurgical coal. The company also ships coal to domestic and international steel manufacturers as well as international power producers.

 
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