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Will Coal Mine Terminations Continue to Affect Westmoreland?

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Westmoreland Coal’s 1Q17 revenue

In 1Q17, Westmoreland Coal Company’s (WLB) revenue of $339 million beat analysts’ consensus estimate by 1.1%. However, it was 4.6% lower than the company’s revenue of $356.3 million in 2Q16. The fall in the company’s revenue was attributed to contract terminations and unfavorable weather conditions.

Coal supply contracts at WLB’s Jewett and Beulah mines were terminated on December 31, 2016, and May 2016, respectively, leading led to lower revenues. This revenue fall was slightly offset by higher revenue from the San Juan mine, which WLB acquired in January 2016.

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All of Westmoreland Coal’s operating segments and subsidiaries were hit by challenging weather in the quarter. Westmoreland Resource Partners, WLB’s Ohio subsidiary, was affected by unseasonably mild weather, which caused pressure on its pricing and demand. Its Kemmerer mine, however, saw heavy snowfall and rain, which increased its costs and lowered its deliveries.

A few operational challenges also lowered sales and increased costs for WLB in 1Q17. The company had to perform dragline repairs in Canada and temporary mining in a lower-yield area of mines in Canada.

Analysts’ estimates

Analysts expect Westmoreland Coal to report revenue of ~$314 million in 2Q17, a fall of nearly 11.9% year-over-year (or YoY). The company’s revenue is expected to be ~7.6% lower than its 1Q17 revenue of $339.7 million.

Unlike WLB, major coal (KOL) producers Cloud Peak Energy (CLD) and Alliance Resource Partners (ARLP) generate a significant portion of their revenues from US coal mines. Peabody Energy (BTU) has mines in the United States and Australia.

Next, we’ll look at Westmoreland Coal’s earnings estimates.

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