Why Arch Coal Inc's Shares Plunged Today

Is this meaningful or just another movement?

Travis Hoium
Travis Hoium
Apr 22, 2014 at 4:14PM
Energy, Materials, and Utilities

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 coal producer Arch Coal Inc (NASDAQOTH:ACIIQ) dropped 10% today after the company reported earnings.

So what: First-quarter revenue fell slightly to $736 million, which was actually well ahead of the $718 million in revenue that analysts expected. But net loss nearly doubled from a year ago to $124.1 million, or $0.59 per share, far greater than the $0.42 loss analysts expected. 

Now what: Coal is facing long-term challenges from oversupply and falling demand, particularly in the thermal market. I don't see these factors changing, and Arch Coal's losses are piling up. Even analysts aren't expecting a profit this year or next and, until we see actual results change, I would stay far away from this stock.