Alliance Resource Partners (ARLP) will release its third-quarter 2014 financial results after the market closes today. In the prior quarter, this coal operator registered a positive earnings surprise of 39.80%. Let’s see how things are shaping up at Alliance Resource Partners prior to this announcement.
Factors to Consider this Quarter
Alliance Resource Partners is a producer and supplier of steam coal to U.S. utilities and industrial customers.
The milder summer months, ongoing railroad congestion, rectification in natural gas oil prices and stricter environmental regulations are going to have a negative impact on thermal coal demand. As a result, thermal coal prices are expected to be under pressure in the U.S.
The United States Environmental Protection Agency plans to reduce carbon emissions by 30% from the power sector by 2030 from 2005 levels. Increasing regulatory restrictions on the generation of power from polluting sources like coal have had an adverse impact on thermal coal producers like Alliance Resource Partners.
Nearly 39% of electricity is generated from thermal coal in the U.S. Demand for thermal coal is expected to fall as utility operators are planning to reduce their coal-based power plants to meet environmental regulations.
Earnings Whispers
Our proven model indicates that Alliance Resource Partners will fall short of the earnings estimates this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here.
Negative Earnings ESP: This is because the Most Accurate estimate stands at $1.04 while the Zacks Consensus Estimate is $1.06, resulting in -1.89% ESP.
Zacks Rank #3 (Hold): Alliance Resource Partners’ Zacks Rank #3 when combined with a negative ESP makes a surprise prediction difficult.
We particularly caution against stocks with Zacks Ranks #4 and 5 going into the earnings season.
Other Stocks to Consider
Here are some 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.
Arch Coal Inc. (ACI) has an earnings ESP of +4.88% and carries a Zacks Rank #3.
Foresight Energy LP (FELP) has an earnings ESP of +3.70% and carries a Zacks Rank #3.
Duke Energy Corp. (DUK) has an earnings ESP of +0.66% and carries a Zacks Rank #3.
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