Arch Coal (ARCH) Beats On Q1 Earnings, Boosts Buyback Program

Arch Coal Inc. (NYSE:ARCH) reported first-quarter 2019 operating earnings of $3.36 per share, which beat the Zacks Consensus Estimate of $2.53 by 32.8%. The bottom line also improved 13.9% on a year-over-year basis.

The strong performance of the company is attributable to record margins from its coking coal portfolio and solid cost control in the Metallurgical segment.

Total Revenues

Total revenues in the reported quarter were $555 million, which beat the Zacks Consensus Estimate of $554 million by 1.2%. However, the reported revenues declined 3.5% on a year-over-year basis due to lower sales volume from its Power River Basin assets. Flood-related rail disruptions in this region, which impacted operations during the first quarter, are expected to persist during major part of the second quarter.

Segment Details

In the Metallurgical segment, the company sold 1.8 million tons of coal, in line with the prior-year quarter. It recorded cash margins of $50.95 per ton compared with $47.64 in the year-ago quarter, owing to higher selling price of coal.

During the quarter, the Powder River Basin segment’s cash margin per ton was down 13% year over year. The company sold 17.1 million tons, down from the year-ago figure of 19.7 million tons.

In the Other Thermal segment, the company’s cash margin was $3.3 per ton compared with $7.06 in the year-ago quarter. Shipment also declined 22.7% year over year to 1.7 million tons due to rail service disruptions and timing issues at West Elk mine.

Highlights of the Release

Arch Coal made considerable progress in the development of its new Leer South mine, completing initial slope work and producing first development tons. The company is on track to commence longwall mining at Leer South in fourth-quarter 2021.

Arch Coal repurchased 872,000 shares of common stock, representing 3.5% of initial shares outstanding, at a total investment of $78.3 million. Its board of directors authorized an additional $300 million of expenditures for share buybacks, bringing the total authorization since the program's launch to $1.05 billion. With this increase, the company had $388 million remaining under its existing authorization as of Mar 31, 2019.

Financial Highlights

Cash and cash equivalents as of Mar 31, 2019 were $218.8 million compared with $264.9 million at 2018-end.

Long-term debt as of Mar 31, 2019 was $297.8 million compared with $300.2 million at the end of 2018.

Cash provided from operating activities in first-quarter 2019 was $84.9 million compared with $66.9 million in the year-ago period.

Arch Coal continues to increase its shareholders’ value through dividends and share repurchases. The company returned nearly $83.6 million to its shareholders via share buybacks and dividends during the first quarter.

Guidance

Arch Coal expects thermal coal sales volume guidance for 2019 within 80-85 million tons. It reaffirmed its coking coal volume guidance in the range of 6.6-7 million tons.

The company expects global coking coal markets to remain strong throughout 2019, backed by resilient world steel demand and global steel prices.

Zacks Rank

Arch Coal currently holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Upcoming Releases

Peabody Energy Corporation (NYSE:BTU) is scheduled to report first-quarter 2019 results on May 1. The Zacks Consensus Estimate for the quarter to be reported is pegged at $1.18.

Hallador Energy Company (NASDAQ:HNRG) is slated to report first-quarter 2019 results on May 6. The Zacks Consensus Estimate for the quarter is pegged at 6 cents.

CONSOL Coal Resources LP (NYSE:CCR) is scheduled to announce first-quarter 2019 results on May 8. The Zacks Consensus Estimate for the to-be-reported quarter stands at 45 cents.

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