Have Arch Coal Inc (ACI) Earnings Reached a Turning Point?

Arch Coal Inc (NYSE:ACI) will release its quarterly report on Tuesday, and shareholders expect the struggles for the coal company to continue not only this quarter but well into the future. Yet with hopes that Arch Coal earnings will start clawing their way back toward profitability, some bottom-fishing investors have started looking at the stock as a potential deep-value play.

Arch Coal Inc (NYSE:ACI) has suffered from low coal prices that resulted from the glut of domestically produced natural gas from shale gas and other unconventional energy plays. Nat-gas prices have hit bottom and started to rise somewhat, though; more importantly, coal companies have looked abroad in search of more dependable demand for coal consumption. Let’s take an early look at what’s been happening with Arch Coal Inc (NYSE:ACI) over the past quarter and what we’re likely to see in its quarterly report.

Stats on Arch Coal

Source: Yahoo! Finance.

Will Arch Coal earnings burn brighter this quarter?
Analysts have gotten more pessimistic about the long-term prospects for Arch Coal Inc (NYSE:ACI) earnings, keeping June-quarter estimates steady but widening their loss expectations for the full 2013 year by 10% and for 2014 by 70%. The stock has continued to feel the pain of the industry, falling 12% since late April.

Arch Coal Inc (NYSE:ACI) and its industry peers have suffered from the combination of plentiful natural gas and increased regulatory scrutiny of emission levels, spurring many major U.S. coal customers to shift their energy use toward nat-gas. Moreover, Arch Coal has suffered particularly hard, as its Appalachian coal operations have higher costs and were more convenient to utility-company customers in the eastern half of the country. Despite spending millions on lobbying efforts, Arch and its peers still face considerable challenges in fighting legislation that could further hurt the industry.

In response, Arch Coal Inc (NYSE:ACI) has sought to increase its exports to countries where coal is still in higher demand. With its deal with Kinder Morgan Inc (NYSE:KMI) to help boost its export capacity, Arch hopes that boosting its access to export markets will provide a new avenue for selling its coal. Yet again, Arch suffers a competitive disadvantage here compared to rival Peabody Energy Corporation (NYSE:BTU), because Peabody’s resources are better located strategically to take advantage of export opportunities.