Earnings season is winding down, with most companies already having reported their quarterly results. But there are still some companies left to report, and James River Coal (NASDAQ: JRCC ) is about to release its quarterly earnings report. The key to making smart investment decisions with stocks releasing their quarter reports is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.
The coal industry has suffered some hard times lately, and James River Coal has been at the epicenter of the resulting plunge for stocks throughout the sector. With natural-gas prices remaining low, can coal companies survive the loss of demand from power-generating utilities and other major customers? Let's take an early look at what's been happening with James River Coal over the past quarter and what we're likely to see in its quarterly report on Thursday.
Stats on James River Coal
Analyst EPS Estimate | ($1.41) |
Year-Ago EPS | $0.02 |
Revenue Estimate | $244.6 million |
Change From Year-Ago Revenue | (32%) |
Earnings Beats in Past 4 Quarters | 2 |
Source: Yahoo! Finance.
Will James River Coal burn brighter this quarter?
Analysts have become increasingly pessimistic about James River Coal's earnings prospects over the past few months, cutting nearly a dime of their earnings-per-share call for the just-ended quarter and more than $0.30 per share from full-year 2013 earnings. The stock has been equally ugly in its performance, falling more than 30% since early December.
After a prolonged drop in coal prices, coal companies see prospects for their industry as divided. Peabody Energy (NYSE: BTU ) has benefited greatly from exports to Asia and Europe, with its assets in Australia helping it supply coal-hungry markets in India and China. But the company sees weak production in the U.S. even as domestic coal use rises somewhat. Alpha Natural Resources (NYSE: ANR ) has found export markets even from its location in the eastern U.S., which makes it tough to get access to Pacific Rim destinations.
James River only has operations in the U.S., forcing investors to hope that it too can look for ways to profit from exports even if domestic use continues to subside. Yet like Alpha Natural, James River's mines are conveniently located near utilities' coal-burning facilities. If calls for reduced coal use among U.S. utilities prove to be overly optimistic, then James River could have a competitive advantage over its larger peers.
In its quarterly report, watch for James River to comment on its capital situation. The company recently bought back more than $60 million in bonds at a huge discount to par value, helping to reduce its outstanding debt but at the cost of creating a limited default situation. Unless conditions in the industry improve dramatically soon, it's hard to see how James River will reverse the ugly path it has taken during the tough times for coal.
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