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Why Is Arch Resources (ARCH) Down 9.8% Since Last Earnings Report?

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It has been about a month since the last earnings report for Arch Resources (ARCH - Free Report) . Shares have lost about 9.8% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Arch Resources due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Arch Resources Q3 Earnings & Sales Beat Estimates

Arch Resources Inc.  reported third-quarter 2021 earnings of $4.92 per share, which surpassed the Zacks Consensus Estimate of $4.74 by 3.8%.

Total Revenues

Total revenues summed $594.4 million, beating the Zacks Consensus Estimate of $479 million by 24.1%.

Highlights of the Release

In the Metallurgical segment, Arch Resources sold 2 million tons of coal, on par with the prior-year figure. It recorded cash margins worth $59.93 per ton compared with $6.26 in the year-ago quarter, primarily owing to higher sales price.

In the Thermal segment, the company sold 19 million tons of coal, up 25.8% from the prior-year figure of 15.1 million tons. It recorded a cash margin of $2.68 per ton compared with $2.08 in the prior-year period.

During the third quarter, Arch Resources commenced longwall operations of its Leer South mine. The company expects Leer South to continue with its steady ramp-up in production  throughout the fourth quarter of 2021 and reach peak-production levels in early 2022. With the addition of Leer South, Arch Resources is in the process of increasing its High-Vol A metallurgical output by an incremental 3 million tons, annually.

The board of directors of Arch Resources initiated a quarterly dividend of 25 cents to be paid out on Dec 15, 2021 to its shareholders of record on Nov 30, 2021.

Financial Highlights

Cash and cash equivalents as of Sep 30, 2021 were $189.7 million compared with $187.5 million on Dec 31, 2020.

Long-term debt as of Sep 30, 2021 was $416.5 million compared with $477.2 million at 2020 end.

Cash provided by operating activities in the first nine months of 2021 was $91.5 million compared with $55.9 million in the year-ago period.

Guidance

Arch Resources committed 7.2 million tons of coking coal volume for 2021. Total thermal coal committed for the current year is 66.5 million tons. The company expects total sales volume in the range of 70.2-74.6 million tons for the same period.

Arch Resources’ 2021 capex guidance is in the range of $220-$240 million.

 

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month. The consensus estimate has shifted 142.77% due to these changes.

VGM Scores

At this time, Arch Resources has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. It comes with little surprise Arch Resources has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.


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