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What to Expect from Major Coal Mining Companies in Their Future Earnings

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Fiscal 2016 guidance

After the 3Q16 earning results, Cloud Peak Energy (CLD) and Alliance Resource Partners (ARLP) revised up their fiscal 2016 shipments guidance. Westmoreland Coal (WLB) revised down its fiscal 2016 shipments guidance.

For fiscal  2016, Cloud Peak Energy expects its coal (KOL) shipments to be ~58.5 million tons at the midpoint of its current shipment guidance compared to its prior guidance of 57.5 million tons.

Alliance Resource Partners revised its fiscal 2016 shipments guidance to 36.5 million–37.0 million tons from its prior guidance of 35.0 million–36.0 million tons. Peabody Energy (BTUUQ) expects its shipments to be in the range of 195 million–210 million tons.

However, Westmoreland Coal (WLB) revised down its fiscal 2016 shipments guidance from 53 million–60 million to 50 million–55 million.

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Analysts expectations

Moving ahead, analysts expect improvement in the adjusted EPS (earnings per share) for a majority of major coal mining companies on a quarter-over-quarter basis. However, they anticipate lower EPS for Alliance Resource Partners.

In the coming quarter, analysts anticipate EPS of $0.73 for Westmoreland Coal compared to EPS of -$0.46 in 3Q16.

For 4Q16, analysts expect Arch Coal and Alliance Resource Partners to report EPS of $0.65 and $0.78, respectively. They anticipate Cloud Peak Energy to report EPS of -$0.01 compared to -$0.03 in 3Q16.

Industry outlook

Lower customer stockpiles due to strong summer cooling demand and an increase in natural gas prices resulted in higher 3Q16 shipments on a quarter-over-quarter basis for a majority of coal mining companies. Also, higher forward seaborne metallurgical coal and thermal coal prices enabled some coal miners to begin contracting for export shipments.

However, realized prices per ton of thermal coal sold remained subdued in 3Q16. As a result, thermal coal exports were uneconomic for a majority of US coal producers during 3Q16.

Moving ahead, cold winter conditions could help sales volume of major coal companies in 4Q16. In the short term, the recovery of coal prices and maintaining liquidity position are crucial for the survival of incumbent coal producers.

In the long term, the fate of the Clean Power Plan and other environment regulations under a Trump presidency could determine the future of major coal mining companies in the US.

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