Peabody Energy Corp. (BTU) will release its first quarter 2014 financial results before the market bell on Apr 24, 2014. In the prior quarter, this coal operator reported a positive earnings surprise of 100.0%. Peabody currently has a Zacks Rank #3 (Hold). Let’s see how things are shaping up at Peabody prior to this announcement.
Factors to Consider this Quarter
Globally, 2013 was a difficult year for coal operators but Peabody was able to register a steady performance thanks to its presence in two of the fastest growing coal markets and its exposure in Australia. The company will continue to enjoy these benefits in the first quarter as well.
The cold wave engulfing major portions of the U.S. in the first quarter and rising natural gas prices created a favorable climate for coal operators. This was confirmed by a current report from the U.S. Energy Information Administration (“EIA) which revealed an increase in coal usage for power production in the first quarter of 2014. This was in spite of the fact that 15 gigawatts of coal fired power units have been retired in the last two years.
In addition, the World Steel Association projects a 3.1% increase in global steel usage in 2014. This will reinvigorate demand for metallurgical coal. Renewed demand for thermal and metallurgical coal is thus expected to benefit Peabody. The company is expected to realize these benefits through the year.
However, the company needs to watch out for strict regulatory measures and the increasing usage of renewable energy and natural gas for generating power.
Accordingly, 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 ESP (Expected Surprise Prediction) and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here.
Zacks ESP: This is because the Most Accurate estimate stands at 1 cent while the Zacks Consensus Estimate is $0.00, resulting in 0.00% ESP.
Zacks Rank #3 (Hold): Peabody’s Zacks Rank #3 combined with a 0.00% ESP complicates the forecasting power. Peabody however registered a positive earnings surprise in the last quarter.
Other Stocks to Consider
Here are some other 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.
CONSOL Energy Inc. (CNX) has an earnings ESP of +5.26% and carries a Zacks Rank #3 (Hold).
Arch Coal Inc. (ACI) has an earnings ESP of +2.38% and carries a Zacks Rank #3 (Hold).
American Electric Power Company Inc. (AEP) has an earnings ESP of +5.56% and carries a Zacks Rank #3 (Hold).