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SunCoke Beats Squarely

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SunCoke Energy Inc. (SXC - Free Report) posted fourth quarter and full year 2012 results. In the fourth quarter, earnings per share of 39 cents beat the Zacks Consensus Estimate of 34 cents. The bottom line was 225% higher than the prior-year figure of 12 cents.

For full year 2012, the company reported earnings of $1.40 per share, handily beating the Zacks Consensus Estimate of $1.35 per share and the year-ago figure of 87 cents.

The results were driven by operations at Middletown, improved performance at Indiana Harbor and continued strong performance across the entire U.S. cokemaking fleet.

Operational Results

In the fourth quarter of 2012, total revenue was $491.4 million, up 15.9% year over year. The top line was also above the Zacks Consensus Estimate of $473 million. In full year 2012, the top line surged 24.4% year over year to $1,914.1 million. It also exceeded the Zacks Consensus Estimate of $1,907 million. The top-line growth was driven by sales at the new Middletown facility and higher coal prices. Operations at Middletown began in Oct 2011.

In 2012, coal production was up 8.2% year over year to 1.5 million tons.

In the fourth quarter, adjusted earnings before interest, tax depreciation and amortization (EBITDA) was up 125.6% year over year to $69.7 million.

Total costs and operating expenses in the reported quarter were up 8.4% year over year to $447.1 million.  In the reported quarter, net income was $27.6 million, up 245% year over year. In 2012, net income was $98.8 million, up 63% year over year.

Segment Results

In the fourth quarter of 2012, revenue from Jewell Coke was $69.6 million, up 15% year over year. Other Domestic Coke generated revenue of $390.6 million, up 18.3% year over year.  Revenue from International Coke was $9.6 million, up 7.9% year over year. The coal mining segment generated revenue of $10.8 million, down 24.5% year over year. Other Income, net was $10.8 million, up 5.9% year over year.

Financial Condition

As of Dec 31, 2012, cash and cash equivalents were $239.2 million, up from $127.5 million as of Dec 31, 2011. Properties, plants and equipment, net were $1,396.6 million, up from $1,391.8 million at the end of Dec 31, 2011. Long-term debt was $720.1 million, down 0.4% year over year. Net cash from operating activities was $206.1 million, up from $101.3 million in full year 2011.

For 2013, the company expects coal production to be approximately 1.4 million tons. It expects adjusted EBITDA to be between $205 million and $230 million and earnings per share in the range of 30 cents to 55 cents.

Our Take

SunCoke came up with a striking performance this quarter, easily surpassing the consensus. 2012 adjusted EBITDA of $265.7 million, earnings per share of $1.40 and free cash flow were well within the company’s guidance.

However, the company failed to achieve its coal mining business guidance on account of the weak coal market environment. Since a part of the revenue comes from coal mining operations, the weak coal market could adversely impact the top and the bottom line of the company, going forward. Moreover, unfavorable economic conditions and laws and regulations remain a matter of concern for the company. The company presently retains a short-term Zacks Rank #5 (Strong Sell).

SunCoke Energy, Inc. is the largest independent producer of coke in the Americas. It produces high-quality coke with its advanced, heat recovery cokemaking process. The coke is used in steelmaking and captures waste heat for derivative energy resale and meets or exceeds environmental standards.

Other stocks to consider are Natural Resource Partners LP (NRP - Free Report) with a short-term Zacks Rank #2 (Buy) and Alliance Resource Partners LP (ARLP - Free Report) and Cloud Peak Energy Inc. (CLD - Free Report) with a short-term Zacks Rank #3 (Hold).


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