ST. LOUIS (AP) -- Arch Coal Inc., one of the world's biggest coal producers, is scheduled to report earnings for the second quarter before the market opens on Friday. The following is a summary of key developments and analyst opinion related to the period.
WHAT TO WATCH FOR: Analysts may be especially interested in Arch's performance so far this year because of the challenges coal miners have faced from weaker demand in the global economy. The coal industry and its stocks have been battered as utilities switched to cheap natural gas from coal to generate electricity. Natural gas prices are the lowest in years because of huge supplies from booming production. And the mild winter across much of the nation didn't put much of a dent in the gas surplus.
Prices for thermal coal used by power plants recently reached the lowest levels in two years as inventories have grown, Bank of America Merrill Lynch analysts said earlier this month. They suggested that mining companies should continue to cut back production and delay or cancel expansion plans.
Arch has done that, announcing plans last month to lay off about 750 workers in the Kentucky, Virginia and West Virginia coalfields. Arch blamed the move on market pressures and a challenging regulatory environment that it said has pushed U.S. coal consumption to a 20-year low.
Since then, BMO Capital Market analyst Meredith Bandy has lowered the rating on Arch to "Underperform" from "Market Perform," citing relatively high debt levels, deteriorating margins and weak demand for Appalachian coal.
Among the first of the coal sector's big players to report each quarter, rival Peabody Energy — the world's biggest private-sector coal company — on Tuesday said its second-quarter earnings fell on soft demand. Peabody trimmed its 2012 production outlook and forecast lower-than-expected earnings for the third quarter.
Citing what he called "a choppy market environment," Peabody Chairman and CEO Gregory Boyce said "the industry experienced significant headwinds in the second quarter, with declining global thermal coal prices as well as low U.S. natural gas prices driving record high U.S. utility coal stockpiles."
St. Louis-based Patriot Coal Corp. filed for Chapter 11 bankruptcy protection this month as it deals with reduced demand due to a myriad of factors including mild weather, a shaky global economy and cheap natural gas.
WHY IT MATTERS: On the heels of Peabody's lower third-quarter outlook, Analysts likely will be eager to hear whether Arch plans any additional pullbacks or alters its earnings guidance for this quarter and the rest of the year.
WHAT'S EXPECTED: On average, analysts polled by FactSet expect Arch to report a loss of 18 cents per share on revenue of $997 million.
EARLIER SHOWING: Arch said its net income over the first three months of this year slipped to $1.2 million, or a penny a share, compared with $55.6 million, or 34 cents a share, a year ago. Revenue was up 19 percent at $1.04 billion.
LAST YEAR'S QUARTER: During last year's second quarter, Arch's profit fell sharply as it produced less coal and costs rose. Net income dropped to $11.1 million, or 6 cents per share, compared with $66.2 million, or 41 cents per share, a year earlier.
STOCK PERFORMANCE: Peabody shares dropped nearly 38 percent during the second quarter.