Coal ETF in Focus on Sluggish Earnings - ETF News And Commentary
07 Febbraio 2014 - 4:00PM
Zacks
Recently, two coal producers came up with muted fourth quarter 2013
earnings. One company Peabody (BTU) – reported on January 30 –
managed to beat the Zacks Consensus Estimate for earnings but
couldn’t make it on the top line. Another producer, Consol Energy
(CNX), reported a big-time miss on both lines the very next
day.
Peabody 4Q4 Earnings in Detail
Coal producer Peabody Energy broke even in the fourth quarter
getting the better of the Zacks Consensus Estimate of a loss of
$0.05 and the year-ago loss of $1.12 per share. However, total
revenue of $1.74 billion was down 13.6% year over year and fell shy
of the Zacks Consensus Estimate of $1.77 billion. Despite higher
volume, lower realized prices in Australia and the U.S. led to the
miss.
Poor sales numbers might have pushed Peabody into the red in the
key trading session. To add to this, a muted guidance also weakened
investor confidence.
The coal producer fell short of consensus estimate on the bottom
line. Peabody predicted its bottom line in the range of a loss per
share of $0.10 to earnings of $0.14 per share while analysts were
expecting the same at a loss of $0.05 per share.
Consol’s Q4 Earnings in Details
Diversified fuel producer Consol Energy‘s adjusted earnings of
$0.03 per share for the fourth quarter missed the Zacks Consensus
Estimate of $0.07. Its revenues also fell 11.7% to $0.82 billion
and lagged the Zacks Consensus Estimate of $1.15 billion by
28.6%.
The average sales price for low-volatile metallurgical coal tumbled
36.4% while the sales price for high-volatile metallurgical coal
slumped 15.3%. However, lower realized prices were also noticed in
the company’s gas division.
Market Impact
Though Peabody’s shares fell 2.88% soon after the earnings
announcement, its shares gained some strength (up 0.95%) the
following day. On the other hand, Consol energy also fell 1.45% in
the key trading session but added 0.03% in after-hours trading.
Both the companies have decent exposure in
Market Vectors
Coal ETF (
KOL) which nudged up 0.17% at
the close of the week. Below, we have highlighted the fund in
detail for those curious as to how the broad industry has been
holding up (read: Coal ETF Investing 101).
KOL in Focus
Launched in January 2008, KOL tracks the Stowe Coal Index,
providing exposure to the companies related to the coal industry.
Even though this index has a global focus, nearly 45% of its
investments are directed toward the U.S. companies, followed by
China with a 13% share.
KOL has amassed an asset base of $136.6 million and charges 59
basis points in fees annually. This fund holds 34 stocks and the
top 10 companies hold a 57.6% share of total net assets. The
in-focus Console Energy and Peabody take up the first and fifth
positions in the portfolio with about 8.79% and 6.52% of the total
assets (see more in the Zacks ETF Center).
The fund is currently trading a little higher than its 52-week low
which leaves room for rally if the broad trends take a positive
turn. The fund’s Relative Strength Index is presently 39.27
indicating that KOL is in oversold territory and a good candidate
for a rebound.
Bottom Line
The surge in natural gas ETFs might have dulled the demand for coal
ETF in the recent past. Coal as a sector was under pressure over
the last year thanks to lower natural gas prices, muted electricity
demand growth, reduced export demand and the need to conform to the
Environmental Protection Agency’s (EPA) Mercury and Air Toxics
Standards (MATS) regulations. This led to the lower realized prices
of the product for most of the producers (read: Is This the Year
for the Coal ETF?).
However, things might take a turn this year on relatively higher
oil and gas prices and subdued coal production in 2013. This,
coupled with restructuring and cost containment efforts by the coal
producing companies, will likely drive the coal ETF over the long
haul.
However, with a current Zacks ETF Rank #4 (Sell), we are looking
for further weakness out of this struggling sector, suggesting that
investors might want to stay far away from this ETF for the time
being.
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PEABODY ENERGY (BTU): Free Stock Analysis Report
CONSOL ENERGY (CNX): Free Stock Analysis Report
MKT VEC-COAL (KOL): ETF Research Reports
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