But those days are over, as recent earnings reports underscore all too clearly. The latest broadside came from Joy Global Inc. (NYSE:JOY) on August 28, when it announced quarterly earnings plummeted 36% from the year before and its order book and backlog continued to dwindle as large mining concerns like Peabody Energy Corporation (NYSE:BTU), Alpha Natural Resources, Inc. (NYSE:ANR) and Arch Coal Inc (NYSE:ACI) keep slashing capital budgets.
Joy, which realizes two-thirds of its revenue from the coal industry, said customers have cut spending on new equipment by as much as half and dramatically reduced expenditures for high-cost maintenance and repair services as well. It also said the downturn that started in the U.S. has now spread overseas and projected these trends would accelerate through 2014, warning revenue next year could dip 20% below this year’s anemic results.
Some analysts, looking at the mounting stockpiles and falling prices worldwide, responded by predicting additional downward revisions for 2014 and even 2015. Such cuts will also obviously impact Caterpillar Inc. (NYSE:CAT), which is the world’s largest manufacturer of mining equipment but somewhat less dependent on coal than Joy. Caterpillar did cut its 2013 outlook in July, but said at the time it expected some pickup in 2014. The recent announcement by Joy, however, seems to contradict that optimism.
The Foolish bottom line
For coal producers, the immediate future doesn’t look very promising. All of these companies had a rough 2012, and at mid-point this year things are getting worse instead of better. Even more ominously, recent projections for 2014 by companies like Joy offer absolutely no reason for optimism.
For those who supply the companies that produce the coal, their fortunes will continue to run on a parallel track. Joy, for example, now says it is unlikely to surpass $4 billion in revenue next year — a far cry from the $4.57 billion that analysts had been expecting and the $5 billion the company still projects for 2013.
For the foreseeable future, then, the best advice for investors is to look elsewhere. King Coal, it seems, is slowly but steadily abdicating its long-held crown.
The article King Coal Losing Grip on Its Crown originally appeared on Fool.com and is written by Howard Rothman.
Howard Rothman has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.