Will Peabody (BTU) Disappoint in Q3?


Peabody Energy Corp. (BTU) will release its third quarter 2013 financial results before the market bell on Oct 17, 2013. In the prior quarter, this coal operator reported a positive earnings surprise of 760%. Peabody currently has a Zacks Rank #2 (Buy). Let’s see how things are shaping up at Peabody prior to this announcement.

Factors to Consider This Quarter

Peabody has an advantage over its domestic peers due to its exposure in the prime coal producing regions of the U.S. besides its presence in Australia. Tapping the demand in South East Asian countries will help the company to counter any decline in domestic coal demand.

Also, the change in top management during the reported quarter is expected to bring fresh ideas  to the board room.

All the coal miners in the U.S. will be affected to some extent by the Climate plan announced by the U.S. President. In addition, the U.S. Environmental Protection Agency's (EPA's) proposed rule for setting up new coal fired plants could lower the demand for coal as a power source.

Earnings Whispers

Our proven model does not conclusively show that Peabody Energy is likely to beat earnings this quarter. That is because a stock needs to have both a positive earnings Expected Surprise Prediction (ESP) (Read: Zacks Earnings ESP: A Better Method) and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here.

Negative ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is at -200.0%.
Zacks Rank #2 (Buy): Though Peabody has a bullish Zacks Rank #2 (Buy), the unfavorable earnings ESP makes a beat unlikely this quarter.  

Other Stocks to Consider

Here are some companies tied to the coal industry worth considering on the basis of our model, which shows that they have the right combination of elements to post an earnings beat this quarter:

Suncoke Energy Partners, L.P. (SXCP) has earnings ESP of +12.50% and carries a Zacks Rank #2 (Buy).

Alliance Resource Partners L.P. (ARLP) has earnings ESP of +10.29% and carries a Zacks Rank #3 (Hold).

Arch Coal Inc. (ACI) has earnings ESP of +9.68% and carries a Zacks Rank #3 (Hold).

Read the Full Research Report on BTU
Read the Full Research Report on SXCP
Read the Full Research Report on ACI
Read the Full Research Report on ARLP

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