On Mar 18, we have issued an updated research report on Arch Coal Inc. ACI . The company is striving hard to cut costs to save its bottom line in this challenging coal environment. Arch Coal suspended its annual dividend to preserve financial flexibility. However, the proposed Environmental Protection Agency (EPA) carbon plan, if implemented, will result in utility providers switching from coal to other alternate energy sources.
St. Louis, MO-based Arch Coal witnessed another lackluster quarter as a result of unfavorable weather patterns dampening domestic coal consumption. Arch Coal’s loss in the fourth quarter was wider than the Zacks Consensus Estimate while the top line marginally surpassed the mark.
Arch Coal has operations in all major coal producing regions of the U.S. Its presence in both eastern and western parts of the country allows it to ship and supply coal to a wide range of customers. The mines are well connected to railroads helping the company to transport coal to the end user.
In 2014, the company brought online its Leer mine which is not only helping in cost reduction but also producing a superior quality of coal. The company is also shifting its focus from thermal coal production to the high-margin metallurgical coal.
A World Steel Association report projects an increase in global steel demand by 2% in 2015 to 1,594 Mt. This will create more options for coal producers like Arch Coal and Walter Energy, Inc. WLT .
However, in order to avoid incremental expenses and comply with the EPA mandate, utility providers are likely to switch their means of power generation to natural gas and other alternate energy sources, which can further curtail the demand for thermal coal.
Key Picks from the Sector
Arch Coal currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the coal space include Hallador Energy Co. HNRG , sporting a Zacks Rank #1 (Strong Buy) and Westmoreland Resource Partners, LP WMLP , carrying a Zacks Rank #2 (Buy).
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.