Arch Coal Trades Down on Sooty Revenue

Arch Coal ACI is down on Tuesday after posting woeful first-quarter sales. The St. Louis-based firm's EPS declined 750 percent to $0.34, matching expectations. Revenue closed down over 20 percent at $825.5 million, falling far short of the over $913 million Wall Street consensus. Lower Prices Lead Decline In terms of volume, Arch's sales dropped a modest four percent year-over-year. However, prices dropped by a more noticeable 16 percent and lead the overall decline in revenue. Lost in the Mountains Arch's Appalachia segment's sales volume decline 24.5 percent to 3.4 million tons. And, its average sales price per ton in the region dropped 14.4 percent, piling on to its woes in the Eastern US. The coal mining firm's sales volume also dropped in the Powder River Basin region of Montana and Wyoming, falling 2.2 percent to 26.6 million tons. Prices in this segment declined 8.6 percent. Meanwhile, the nation's second-largest coal producer's Western Bituminous Region was the lone bright spot, with its sales volume growing six percent to 3.5 million tons. As with the other segments, though, prices declined, albeit by a modest 3.4 percent. Citigroup Downgrade On April 15, Benzinga reported that Citigroup downgraded Arch from Buy to Neutral. The downgrade led to a 9.5 percent drop that day for the company's stock. US Coal Market to Improve? According to President and CEO John W. Eaves, “Positive catalysts, such as normalized weather and higher competing fuel prices, are improving the outlook for the domestic thermal market, our largest market by volume. We expect these trends to continue to reduce customer coal stockpiles throughout 2013 and to create a more balanced U.S. coal market thereafter. Globally, we believe metallurgical and thermal coal markets are in the process of stabilizing, and we anticipate gradual improvement as we progress through the remainder of the year.” Eaves also stated, “The trend in U.S. coal markets is improving. U.S. power demand is rising in 2013, coal production continues to rationalize, and coal is regaining its share of the domestic power generation market due to the higher cost or lack of availability of competing fuels.” Hazy Outlook Arch hasn't offered any specific EPS or revenue estimates, but it anticipates selling 133-144 million tons of coal during fiscal 2013. At the middle-ground of 138.5 million tons, it would fall short of the 140.7 million tons it produced in 2012. Black Day on Wall Street On word of its revenue woes, Arch is down big in the early hours of trading. The stock is falling toward $4.50 as of this writing after closing at $4.89 on Monday. Arch Coal is down around seven percent on Tuesday.