This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

Arch Coal Needs a Spark

Arch Coal's cost reduction also compared favorably to market leader Peabody Energy. Unfortunately, though, the 13% decline in average selling prices per ton negated any positive effects the company should have gained from the operational improvements. Given that this is a "bottom line business," the fact that Arch Coal still couldn't post break-even results was nonetheless disappointing.

Investors will read this and accuse me of focusing too narrowly on setbacks. But given the deficits with which management has had to work -- many self-inflicted -- I'm not yet ready to give Arch Coal the benefit of the doubt. Let's not forget that this is the same management that bet incorrectly on a transformational met coal, burdening itself with significant debt after the industry flamed out, leaving only ashes.

And it doesn't seem as if management has gotten over that poor decision. In fairness, Arch Coal isn't the only one that got burned. Peabody absorbed debt with its 2011 purchase of Macarthur. Alpha Natural Resources over-leveraged with its $7.1 billion deal in 2011 for Massey Energy. The difference, however, is that those deals have not impacted how Alpha Natural and Peabody project for the future.

I won't say Arch Coal management is scared. But I believe they've lost a bit of confidence following an embarrassing deal. Although there is clearly an uptick in coal demand, spurring positive outlooks from Cloud Peak, Alpha Natural, and Peabody, Arch Coal's management does not share in the enthusiasm, stating: "So while we are seeing some signs that coal markets are poised to improve, we aren't ready to predict that turnaround will occur."

I realize my interpretation here is highly subjective. What I do know is that in an industry that has had its lunch money stolen for years, confidence matters. And while it's possible that Arch Coal is just being cautious with its guidance, I don't believe it serves their interest at this point. Nor does it help investors eager to believe in management's ability to deliver.

At the time of publication, the author held no position in any of the stocks mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

2 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
ACI $1.12 -2.61%
BTU $6.61 -2.22%
AAPL $126.41 -1.66%
FB $81.21 0.39%
GOOG $575.33 0.34%

Markets

DOW 18,135.72 +38.82 0.21%
S&P 500 2,101.04 +2.51 0.12%
NASDAQ 4,982.8090 +15.6680 0.32%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs