Buying More Arch Coal on "Disappointing" 70-110% Earnings Growth

Once again highlighting why it never hurts to take profits -Arch Coal (ACI) apparently is disappointing The Street with guidance of 70-110% earnings growth - not good enough! Stock falls. Essentially a wide range in which the bottom is far below the current consensus... $2.00 - $2.50

(analysts in at $2.48). The stock was near $53 Monday morning, now back at $47. I don't have the old guidance ahead of me, but this range is up sharply from last year's $1.21, but analysts got ahead of themselves and were looking for 100% earnings growth. For a coal company? eek.

• Arch Coal (ACI), a key coal producer, expects big growth in per share earnings this year, company Chief Executive Steve Leer said on Monday.
• Earnings per share were seen coming in at $2.00 to $2.50 in 2008, up sharply from $1.21 last year, Leer said in a presentation at the April 6-10 Howard Weil Energy Conference in New Orleans.

More important (to me), in this day to day noise... i.e. wow you only plan to grow 80% instead of 100%, sell it off!.... is the comments of a coal shortage....sort of coincides with a lot we've been hearing ... shortages mean 1 thing ... higher prices. All good to me as an investor (not so good if you like to heat your home).

The "World of Shortages" theme continues to play out week by week, month by month, under the radar. Again, for the 100th time - the US is in a global competition for resources; all these folks stuck in 1980s thinking of "when the US slows, the price of every commodity will fall off the cliff" are ethno-centric, narcissistic, and over the long run will be proven wrong (over the short run, the dominant thinking of when the US is slow, prices must go down can control the stock price downward)

• Global coal supply will fall short by up to 35 million tons in 2008 and the deficit is set to grow going forward, ensuring that prices remain strong, the CEO of coal miner Arch Coal Inc (ACI) said on Monday.
• "We estimate that global supply of coal will be short between 25 and 35 million tons this year," Steve Leer told analysts at an energy conference.
• "We will end up using more and more coal going forward," he told analysts at the April 6-10 Howard Weil Energy Conference in New Orleans. He said very strong international markets were leading a strong domestic market.

We're addicted to energy... I've said many times, why the Federal Government is not throwing 10 x 10 sq mile solar grids in AZ and NV is beyond me. Or nuclear plants. Or refiners on old army bases. Any solutions from those knuckleheads? I do realize the solar lobby (does it exist) does not line the pockets like the farmers, banks, or homebuilders, but throw the peons of this country a peanut  from Washington...I'm so "concerned", by this "earnings disappointment," I am going to take this opportunity to buy more here in the $47s, replacing what I sold Monday morning at around $52. Thank you.

Disclosure: Long Arch Coal in fund and personal account

Comments

[jimmy46:]

First you buy a stock, then you tout it, ho hum

2008 Apr 07 09:59 PM

[User 160313:]

Interesting that you seem upset that the street sold off the stock.
Your last line says you sold it this morning@ 52.
Maybe everyone is trading like you.
Sell on the news.
The market sold off on alcoa eanings.
Not so sure about btu. now.

2008 Apr 07 10:05 PM

[JJTERRITO:]

Wall Street has to come to grips with their Greed Mentality.It is one thing to sit behind a desk and say"You should be making more money." Itis another thing to get the coal out of the ground,onto a rail car and get it to market.Analysts should also set aside their agenda and be honest.

2008 Apr 08 08:44 AM

[ali k:]

Of course - buying any company on a drop after an overreaction is a smart trade. It's a bit stressful though - sort of rolling the dice? Buying the top coal company at $47 is a long term play - but how much is the stock price already reflecting the increased demand already?

2008 Apr 09 05:31 PM

[bluegold:]

coal is the most utilized fuel, with oil showing a bottom above $100, and posco conceeding to huge price increases for top grade coal, i see this commodity aproaching gem stone prices in the near future. if oil falls, so will coal. but after driving my own car and having to take a bus while it was being repaired!! the demand for cars in china will grow for years. oil is at the bottom, coal is at its' bottom, and my tulup bulbs are starting to bloom.

2008 Apr 10 08:56 PM

[misterchan:]

naveedsmind - ACI is not the top coal co. BTU is. That is the majority opinion. They have the cleanest coal.

2008 Apr 13 06:56 PM