Could Arch Coal’s Margins Improve in 3Q17?


Oct. 31 2017, Updated 6:33 a.m. ET

Arch Coal’s earnings estimates

In 3Q16, Arch Coal’s (ARCH) adjusted EBITDAR (earnings before interest, tax, depreciation, amortization, and restructuring) were about $81.3 million, and its EBITDAR margin was 14.8%. Analysts expect the company to report EBITDAR of about $95 million in 3Q17 and an EBITDAR margin of 17.3%. A higher EBITDAR figure suggests higher income from the company’s ongoing operations.

Arch Coal’s EBITDAR for the six months ended June 30, 2017, were about $216 million. Analysts expect its EBITDAR margin to widen in 2H17 as coking coal shipments are anticipated to increase. In 2017, Arch Coal expects thermal coal shipments of 87 million tons–95 million tons.

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The company expects depreciation, depletion, and amortization, excluding sales contract amortization, of $124 million–$132 million, and sales contract amortization of $50 million–$58 million. Arch Coal’s fiscal 2017 capital expenditure guidance is $52 million–$60 million, inclusive of costs associated with land and reserves acquired in Colorado and West Virginia.

Arch Coal (ARCH) and coal (KOL) peers Peabody Energy (BTU), Cloud Peak Energy (CLD), and Alpha Natural Resources (ANRZQ) may see their margins significantly affected due to price movements in the commodity market. In the final article of this series, we’ll examine the factors that investors should watch when Arch Coal releases its 3Q17 earnings results.


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