Alpha Natural Resources Reports Earnings, Beats Estimates - Analyst Blog

Coal producer Alpha Natural Resources ANR reported earnings of 7 cents per share for the first quarter of 2014, surpassing the Zacks Consensus Estimate of a loss of 58 cents by a wide margin. Alpha Natural Resources had incurred a loss of 47 cents per share in the year-ago quarter.

Total Revenue

Alpha Natural Resources' total revenues of $1.12 billion in the first quarter beat the Zacks Consensus Estimate of $1.09 billion. However, the top line came in below the year-ago figure of $1.33 billion.

The year-over-year decline was primarily due to lower production of coal as well as a lower selling price per ton of coal. Consequently, coal revenues decreased 16.4% from the year-ago period.

Highlights of the Release

Coal tons sold in the first quarter decreased 6.5% to 21.4 million tons. The average realized price per ton also fell 10.7% year over year to $44.48.

Selling, general and administrative (SG&A) expenses in first quarter 2014 were $41 million, compared with $44 million in the year-ago period. The SG&A decline was due to Alpha's cost restructuring initiatives.

Financial Update

Cash and cash equivalents of the company as of Mar 31, 2014 were $0.53 billion versus $0.62 billion as of Dec 31, 2013.

Long-term debt as of Mar 31, 2014 was $3.37 billion versus $3.39 billion as of Dec 31, 2013.

Cash provided by (used in) operating activities during the first three months of 2014 was ($53.9) million versus $65.4 million in the comparable prior-year period. Capital expenditure in the first quarter of 2014 was $39.7 million versus $44.2 million in the first quarter of 2013.

During the quarter the company repurchased shares worth $1.04 million versus $0.9 million in the first quarter of 2013.

Guidance

The company expects to ship 78 to 88 million tons of coal in 2014, which will include 15 to 18 million tons of Eastern metallurgical coal, 26 to 30 million tons of Eastern steam coal, and 37 to 40 million tons of Western steam coal out of the PRB.

SG&A expenses are expected to range from $110 million to $140 million for 2014. Interest expense and depreciation, depletion and amortization expense are anticipated in the range of $240 million to $255 million and $700 million to $800 million, respectively.

Capital expenditure for 2014 is expected in a range of $225 million to $275 million.

Other Company Release

Arch Coal Inc.'s ACI first-quarter 2014 adjusted loss of 60 cents per share was much wider than the Zacks Consensus Estimate of a loss of 42 cents.

Peabody Energy Corporation BTU reported a loss per share of 19 cents in the first quarter 2014, lagging the break-even Zacks Consensus Estimate by a wide margin.

CONSOL Energy Inc. CNX reported pro forma earnings of 53 cents per share for the first quarter of 2014, surpassing the Zacks Consensus Estimate of 20 cents by a whopping 150%.

Our View

Alpha Natural Resources was able to surpass expectations by a wide margin.

If we go by the World Steel Association report, global steel usage is expected to increase 3.1% in 2014 from 2013 levels. This is expected to create fresh demand for met coal in the global markets. However, the supply glut in the majority of coal markets is putting downward pressure on prices. To accommodate the demand-supply imbalance, the company made downward adjustments to its met coal shipment guidance.

Alpha Natural Resources currently holds a Zacks Rank #4 (Sell).