Patriot Coal Shares Jumped: What You Need to Know

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.

Interested in more info on Patriot Coal? Add it to your watchlist by clicking here.

Fool contributor Travis Hoium does not have a position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.

Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (3) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 02, 2012, at 4:37 PM, crazyshao wrote:

    And what happens to coal if natural gas drillers continue to curtail production? You think coal company stocks are going to trade near the bottom of the 52wk range while the Dow is near a top?

  • Report this Comment On February 03, 2012, at 8:58 AM, Triller wrote:

    Hundreds dying in Ukraine due to extremely cold temperatures, Europe experiencing Siberia type weather. People are digging out coal from dormant coal mines just to survive. Thermal coal just entered its demand cycle. Too early to make predictions about coal, also Patriot is a buyout target along with JRCC. Coal is saving lives, while the president is cutting coal production without a viable alternative in place. Typical shortsightedness by politicians who want to rule the world.

  • Report this Comment On February 06, 2012, at 8:32 AM, XMFSinchiruna wrote:

    Travis,

    I can't agree with that analysis. I believe the market has already overshot the mark in reacting to anticipated demand deterioration for Appalachian thermal coal, resulting in stocks that yield low-cost exposure to long-life assets.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1772060, ~/Articles/ArticleHandler.aspx, 9/18/2014 3:47:21 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement