Arch Coal, Inc. (NYSE:ARCH) Analysts Just Cut Their EPS Forecasts
Today is shaping up negative for Arch Coal, Inc. (NYSE:ARCH) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analysts seeing grey clouds on the horizon.
Following the latest downgrade, the four analysts covering Arch Coal provided consensus estimates of US$1.6b revenue in 2020, which would reflect a painful 26% decline on its sales over the past 12 months. Following this this downgrade, earnings are now expected to tip over into loss-making territory, with the analysts forecasting losses of US$1.70 per share in 2020. Before this latest update, the analysts had been forecasting revenues of US$1.8b and earnings per share (EPS) of US$4.59 in 2020. There looks to have been a major change in sentiment regarding Arch Coal's prospects, with a substantial drop in revenues and the analysts now forecasting a loss instead of a profit.
View our latest analysis for Arch Coal
The consensus price target was broadly unchanged at US$53.83, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the valuation. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. The most optimistic Arch Coal analyst has a price target of US$76.00 per share, while the most pessimistic values it at US$37.00. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue shrink 1.3% per year. While this is interesting, Arch Coal's, revenues are still expected to shrink next year, and at a faster rate than the wider industry.
The Bottom Line
The most important thing to take away is that analysts are expecting Arch Coal to become unprofitable this year. Unfortunately they also downgraded their revenue estimates, and our aggregation of analyst estimates suggests that Arch Coal revenue is expected to perform worse than the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on Arch Coal after the downgrade.
Worse, Arch Coal is labouring under a substantial debt burden, which - if today's forecasts prove accurate - the forecast downgrade could potentially exacerbate. You can learn more about our debt analysis for free on our platform here.
Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.
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