Peabody Energy (BTU) will release its fourth quarter 2012 financial results before the market bell on Jan 29, 2013. In the prior quarter, this coal operator reported a 50.00% earnings surprise. Peabody currently has a Zacks Rank #5 (Strong Sell). Let’s see how things are shaping up at Peabody prior to this announcement.
Factors to Consider This Quarter
2012 was overall a dull year for the coal industry as coal companies continued to face the burnt of a mild winter, rising competition from natural gas producers, increasing usage of alternate energy for electricity generation and compliance with increasing government regulation making their operations costlier.
Peabody’s underground Willow Lake Mine in Southern Illinois met with an accident in Nov 12, and the company decided to permanently idle the mine as it failed to comply with acceptable security standards. This closure will result in a charge of 10 cents to 15 cents (after tax) in the fourth quarter.
The company tried to sharpen its competitive edge and strengthen its global operation by making changes to the top management in both American and Australian business units.
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 Expected Surprise Prediction (ESP) (Read:Zacks Earnings ESP: A Better Method) and a Zacks Rank of #1, 2 or 3 for this to happen. This is not the case here.
Positive Zacks ESP: This is because the Most Accurate estimate stands at 28 cents while the Zacks Consensus Estimate is lower at 26 cents, resulting in +7.69% ESP.
Zacks Rank #5 (Strong Sell): Peabody’s Zacks Rank #5 complicates the forecasting power of ESP making surprise prediction difficult. Even though Peabody registered earnings surprise in the last four quarters, we caution investors against the stock going into the earnings announcement, especially with the company observing negative estimate revisions momentum.
Other Stocks to Consider
Here are some other companies which are linked with the coal industry you may want to consider 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 earnings ESP of +18.18% and carries a Zacks Rank #3 (Hold).
Otter Tail Corporation (OTTR) has earnings ESP of +6.67% and carries a Zacks Rank #3 (Hold).
Wisconsin Energy Corp. (WEC) has earnings ESP of +2.38% and carries a Zacks Rank #1 (Strong Buy).
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