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Nearly all US coal producers estimated to book lower Q3 earnings YOY

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Nearly all US coal producers estimated to book lower Q3 earnings YOY

Analysts expect all but one U.S. coal company to report lower earnings per share for the third quarter as compared to the same period of 2019.

Hallador Energy Co. is the only publicly traded U.S. coal company predicted to report higher third-quarter earnings than the year before, according to an S&P Global Market Intelligence analysis of analysts' consensus estimates. However, industry observers expect the bulk of the sector to outperform the previous quarter in terms of earnings per share.

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Most U.S. coal companies reported losses for the second quarter, but several companies still beat analysts' expectations for the period. In addition to facing a secular decline in demand for coal used to generate power in the U.S., domestic markets for thermal and metallurgical coal have been tepid in recent months, and the trend has been exacerbated by the COVID-19 pandemic.

Hallador is one of only two U.S. coal companies that analysts predicted will not report a loss to shareholders for the third quarter. The Illinois Basin thermal coal producer is based in Indiana and reported net income of 1 cent per share for the second quarter. Consensus estimates predict earnings per share of 17 cents for the company for the third quarter.

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Analysts also expect Natural Resource Partners LP to post positive earnings per share for the third quarter. The company, which owns interests in coal, aggregates and industrial minerals in the U.S., is projected to report 30 cents per share in earnings.

Contura Energy Inc. is expected to report the greatest loss per share among publicly traded U.S. coal producers. Analysts project the company will report a loss of $3.11 per share for the third quarter.

Contura has been working to assure investors it is distancing itself from thermal coal as it pivots to a focus on metallurgical coal production. An activist shareholder that has accumulated a significant stake in the company pushed for an acceleration of that process and the ouster of certain board members in an Oct. 7 letter.

"As coal industry investors are aware, the last year has been one of the most challenging years for U.S. coal producers due to a variety of factors, including weak global coal demand, low coal prices, and, of course, the COVID-19 pandemic," Contura said in an Oct. 13 response to the letter. The company said its management and board acted quickly to manage the situation.

Other coal producers primarily focused on producing metallurgical coal are also expected to report a loss for the quarter, such as Ramaco Resources Inc. and Warrior Met Coal Inc.

Analysts' consensus estimates project that Arch Resources Inc. will record the second-most significant loss per share for the third quarter among U.S. coal companies, with a loss of about $1.04 per share. Arch recently said it would abandon plans to form a joint venture of western U.S. coal assets with Peabody Energy Corp. after a federal judge sided with the Federal Trade Commission in late September to block the deal.

Analysts expect Peabody to report a loss of 79 cents per share for the quarter.

"We are deeply disappointed with the court's decision as the intense all-fuels competition is clearly apparent to us," Peabody President and CEO Glenn Kellow said in a statement referencing the decision, pointing to the company's argument that the antitrust decision should look beyond the Powder River Basin coal market to other sources of competition for power generation share.

Estimates suggest Consol Energy Inc. will post a loss of 35 cents per share for the third quarter, an improvement over the previous quarter but a greater loss year over year.

The nine publicly traded U.S. coal companies in the analysis had an aggregate market capitalization of about $2.66 billion. None of the companies were expected to report more than $1 billion in revenue for the third quarter.