Arch Coal Inc. (NYSE: ACI) - Q1 FY’11 Earnings Preview
Monday, April 25, 2011 11:40 AM

Arch Coal Inc. (NYSE: ACI) is expected to report its fiscal 2011 fir-quarter financial results on Tuesday, April 26 at 11:00 AM EST. In the last four quarters ending December 31, 2010, ACI's reported earnings per share missed analysts' consensus estimate by margins between 5.40 percent and 62.50 percent. For the quarter ended June 2010, EPS exceeded expectations by 8 percent.

Arch Coal was formed in July, 1997 through the merger of publicly traded Ashland Coal Inc. and privately held Arch Mineral Corporation. Arch Coal is one of the world's largest and coal producers. Through its national network of mines, Arch represents roughly 15 percent of America's coal supply. The core business is supplying cleaner-burning, low-sulfur coal to customers on four continents, including U.S. and international power producers, industrial and other end users as well as steel manufacturers. The company maintains its corporate headquarters in St. Louis, Mo.

The company reported fourth quarter 2010 net income of $47.8 million, or $0.29 per diluted share, compared with net income of $1.5 million, or $0.01 per diluted share, in the prior-year period. Fourth quarter 2010 revenue grew 15 percent versus the prior-year quarter on higher sales volume. Adjusted earnings before interest, taxes, depreciation, depletion and amortization (EBITDA) increased 33 percent versus a year ago to reach $192 million in the fourth quarter of 2010. Additionally, the company generated free cash flow of $147 million in the quarter just ended, matching the previous record set in the third quarter of 2010. For full year 2010, net income totaled $158.9 million, or $0.97 per diluted share, compared with net income of $42.2 million, or $0.28 per diluted share, for full year 2009. Adjusted 2010 net income was $185.8 million, or $1.14 per diluted share. Annual EBITDA reached $724.1 million in 2010, representing the second highest level in company history. Arch also set a new record for sales revenue of $3.2 billion in 2010, a nearly 25-percent increase versus the prior year.

During the fourth quarter of 2010, Arch spent $26.6 million to increase its equity interest in Knight Hawk Holdings LLC, a private Illinois Basin coal producer, from 42 percent to 49 percent. In recent developments, Arch announced that it has acquired an equity interest in Millennium Bulk Terminals-Longview LLC, the owner of a bulk commodity terminal on the Columbia River near Longview, Wash., in exchange for $25 million plus additional consideration upon the completion of certain project milestones. Arch also recently signed a five-year throughput agreement with Canadian Crown Corporation Ridley Terminals Inc. to facilitate coal exports to Pacific Rim markets. The agreement grants Arch the ability to ship up to 2 million metric tons of coal through the RTI terminal for 2011, and up to 2.5 million metric tons of coal annually through RTI for 2012 through 2015.

On February 23, 2011, the board of directors declared a quarterly cash dividend of $0.10 per share on the company's common stock. The dividend is payable March 15, 2011 to shareholders of record on March 1, 2011. For fiscal 2011, earnings per diluted share on a GAAP basis is projected to be between $1.93 and $2.42, including amortization of coal supply agreements. Adjusted EBITDA is forecasted to be in the $910 million to $1 billion range. Capital spending is expected to be in the $370 million to $410 million range. Depreciation, depletion and amortization expense (excluding non-cash amortization of acquired coal supply agreements) is projected to be between $378 million and $388 million. Analysts have estimated an average EPS of $0.34 for the first quarter of fiscal 2011 against an EPS of $0.03 in the comparable period last year. The average revenue estimate for for the quarter has been increased to $837.29 million from $711.87 million in the prior year's period. This is an estimated increase of approximately 17.60 percent. In the last 52 weeks, the stock has been trading in the range of $19.09 to $36.99. The stock closed up by 0.30 points, or 0.88 percent, to settle at $34.53 on April 11, 2011. The target price of the stock is estimated between the range of $32 and $50 with the mean target price of $39.22.



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