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CNX Coal (CNXC): Will the Stock Disappoint in Q2 Earnings?

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Thermal coal producer & supplier CNX Coal Resources LP (CNXC - Free Report) is scheduled to report second-quarter 2016 results on Jul 25, after the closing bell. Last quarter, the partnership reported a negative earnings surprise of 45.00%. Let’s see how things are shaping up for this quarter.

Factors to Consider

We expect persistently weak coal prices to hurt CNX Coal’s financial performance. Increasingly stringent emission control rules, along with growing popularity of cheaper and cleaner sources of energy, have resulted in the overall slump in coal demand, thereby putting coal producers in a tight situation.

Even the partnership’s high-yielding coal properties are expected to suffer from the broad-based downturn in the industry. These factors are anticipated to substantially dent its second-quarter results.

On the flip side, assuming a normal summer, management believes that the industry-wide decline in coal production may reduce inventory levels in the second quarter and thereafter. Moreover, the partnership is optimistic on the restructuring initiatives that were undertaken in the first quarter. These actions have boosted its productivity and operational excellence significantly, and may have been able to expedite shipment schedules and drive economies of scale in the soon-to-be-reported quarter.

Surprise History

CNX COAL RESRCS Price and EPS Surprise

CNX COAL RESRCS Price and EPS Surprise | CNX COAL RESRCS Quote

The above chart indicates that CNX Coal missed earnings estimates in the previous quarter.

Earnings Whispers

Our proven model does not conclusively show that CNX Coal will be able to beat estimates this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. But that is not the case here, as you will see below.

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 16 cents.

Zacks Rank: Though CNX Coal’s Zacks Rank #1 increases the predictive power of ESP, its 0.00% ESP makes surprise prediction difficult.

Note that we caution against stocks with a Zacks Ranks #4 or #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

At present we have only one company related to the coal industry worth considering on the basis of our model, which shows that it has the right combination of elements to post an earnings beat this quarter.

CONSOL Energy Inc. (CNX - Free Report) has an Earnings ESP of +22.73% and a Zacks Rank #2. The company is expected to report earnings on Jul 26, before the market opens.

However, you may also consider these oil & energy stocks, as our model shows that they too have the right combination of elements to post an earnings beat this quarter:

Chesapeake Energy Corporation (CHK - Free Report) has an Earnings ESP of +14.29% and a Zacks Rank #2. It is expected to report earnings on Aug 3, before the market opens.

Anadarko Petroleum Corporation has an Earnings ESP of +13.75% and a Zacks Rank #2. It is expected to report earnings on Jul 26, after the market closes.

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