Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Patriot Coal (NYSE: PCX ) jumped 14% today after announcing terrible quarterly results. Wait…What? Yep, that's right.
So what: Revenues rose 14.4% from last year to $604 million, but loss per share expanded to $0.42 per share. Analysts were looking for revenue of $643.4 million and a loss per share of $0.30. So why is the stock jumping?
Patriot also announced it is allowing the Big Mountain complex to idle effective immediately. The mine produced 1.8 million tons of thermal coal in 2011, and a weak thermal coal market says the demand isn't there to take it.
Now what: Investors are looking well beyond today's results to the fact that the company is controlling output in a weak demand market. This, in theory, will help improve prices and cut production costs per ton. Since thermal coal usage is falling in the U.S., I highly doubt that the production cut will do anything but stall problems already forming in the thermal coal market. Unless China picks up demand from U.S. producers this isn't a space I would want to be invested in right now. This is a great time to exit if you agree with that analysis.
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