Back to top

Image: Bigstock

Reasons to Add ARCH Resources (ARCH) to Your Portfolio Now

Read MoreHide Full Article

ARCH Resources Inc.'s (ARCH - Free Report) acquisition of assets near the Leer mine, the development of longwall in the Leer South mine, an increase in the price and demand for metallurgical coal and long-term coal supply contracts are set to drive its performance in the long run.

Let’s focus on the factors that make this Zacks Rank #1 (Strong Buy) stock a solid investment pick at the moment. You can see the complete list of today’s Zacks #1 Rank stocks here.

Growth Projection & Surprise History

The Zacks Consensus Estimate for 2022 earnings has moved up by 60% in the past 30 days to $60.49 per share.

The Zacks Consensus Estimate for 2023 earnings has moved up by 54% in the past 30 days to $25.52 per share.

ARCH Resources delivered an average earnings surprise of 15% in the last four quarters.

Development & Demand

Arch Resources acquired 20 million tons of low-cost, high-quality and High-Vol A coking coal reserves directly adjacent to the Leer mine for $52.5 million. The reserve addition is expected to extend the life of the Leer mine by nearly six years.

ARCH Resources has commenced operation at the Leer South longwall mine, which is going to expand its High-Vol A metallurgical output by an incremental 4 million tons annually and allow it to cater to the rising demand globally. This mine is expected to boost Arch Resources’ low-cost met coal production for the next two decades.

Arch Resources received the commitment for 3.9 million tons of the coking coal volume for 2022. The total thermal coal committed for 2022 is 78.8 million tons. ARCH expects the total sales volume in the range of 81.0-87.8million tons for 2022.

Debt Position

The debt to capital of ARCH Resources at the end of the fourth quarter of 2021 was 33.1% compared with the industry average of 41.4%. This indicates that ARCH is using comparatively lower debts to manage the business compared with peers.

Return on Equity

Return on Equity (ROE) indicates how efficiently a company is utilizing shareholders’ funds in the business to generate returns. At present, ARCH Resources’ ROE is 85.2%, higher than the industry average of 15.4%.This indicates that the company is utilizing the funds more effectively than industry peers.

Price Performance

In the past six months, ARCH Resources has rallied 87.2% compared with the industry’s 59.8% growth.

Zacks Investment Research
Image Source: Zacks Investment Research

Other Stocks to Consider

Some other similar-ranked stocks from the same sector, such as Conoco Phillips (COP - Free Report) , DVN Energy (DVN - Free Report) and Chevron (CVX - Free Report) , among others, are worth considering.

The long-term (three to five years) earnings growth of Conoco Phillips, DVN Energy and Chevron is projected at 20%, 51.4% and 13.1%, respectively.

The Zacks Consensus Estimate for 2022 earnings per share of Conoco Phillips, DVN Energy and Chevron has moved up 74%, 81.3% and 57.4%, respectively, year over year.

In the past three months, COP, DVN and CVX shares have surged 44.3%, 46.1% and 41.4%, respectively.

Published in