Cloud Peak Energy tanks 8% on September 2’s lower guidance

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Actual versus estimates

Cloud Peak Energy (CLD) reported adjusted earnings per share of 10 cents against market expectations of a loss of 10 cents a share. But sales came in lower, at $320 million against the $333 million expected by Wall Street analysts.

With limited cost saving opportunities compared to peers, Wall Street analysts expect the 3Q 2014 improvement in profitability to be weaker than peers’. The market now expects 3Q 2014 sales of $345 million with earnings per share of 7.1 cents (adjusted earnings per share of 7.6 cents). The market expects adjusted net income for 3Q 2014 to come in at $3.37 million.

Cloud Peak Energy (CLD) fell 1% on July 29, when results were announced. The market expects weaker improvement in CLD’s earnings per share compared to peers’ in the near to long terms.

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The same day, Arch Coal (ACI), Peabody Energy (BTU), and Alpha Natural Resources (ANR) were up 2.3%, 2.3%, and 8.8%, respectively. One of the explanations for this difference could be that the long-term future prospects for thermal coal are weaker than for metallurgical coal. Investors still willing to get exposure to the industry can invest in the SPDR S&P Metals & Mining ETF (XME).

JP Morgan reaffirmed its “neutral” rating with a price target $20. Brean Capital maintained its “hold” rating with $14 fair value and believes that the stock is fully valued at the current price.

2014 guidance

The company now expects to sell 83 million to 86 million tons of coal in 2014. This is 3 million tons lower than the earlier guidance. The company has adjusted EBITDA guidance at $170 million to $200 million for 2014.

The stock tanked 8% on September 2 after the release of the revised guidance. Management expects the capital expenditure for the whole year to be between $30 million and $40 million.

So how does the long-term outlook for the company look? Read on to find out more.

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