Arch Coal Misses Earnings But Stock Soars Higher

Oct 28, 2011
J. Webster
Comments Off on Arch Coal Misses Earnings But Stock Soars Higher

The stock market is a funny thing sometimes. When stocks seems like they should go up they go down. And when stocks seems like they should go down they go up. The later was the case for Arch Coal’s stock (ACI) today. And, for those not used to the market’s sometimes maddening logic, it was frustrating, confounding and confusing.

Over on the Yahoo Finance message board for Arch Coal, one board member was in utter disbelief as to why the stock soared nearly 10% after it missed earnings:

Complete and Total Earnings Miss
Will someone please explain to me WTF is going on here. This stock just didn’t miss earnings. They completely and totally missed earnings. They missed earnings per share by 33%!!! By .04 when the street estimated .12. They missed revenues by $30 million dollars. AYFKM? This stock should easily, I mean easily be down 20% as is every stock who completely got messed up their earnings this quarter! And instead this stock is up like 20% in the last two days!!! This doesn’t even begin to make any sense whatsoever. Obviously we would expect this to drop like a rock any second, but why the ridiculous unfounded pop?

Less than a month ago Arch Coal was trading at around $13 a share. Today it hit $20 a share.

So what was the story? Why did Arch Coal miss earnings but go higher? This was an old case of the stock already beaten up and at a low price, so with guidance going forward  positive, it shot higher. It’s painful sometimes but when a stock is already low even bad news becomes good news when the future looks a little brighter for a company. So it goes for Arch Coal even though they missed on earnings and their revenue was half what it was a year ago. All this bad news was trumped by good guidance.

There were a number of reasons for Arch Coal’s stock to go down: flooding in the Midwest, a mine was shut down, and costs due to their take over of International Coal Group. However, it was probably this one phrase from the mouth of the CEO that boosted the stock the most:

“Arch Chairman and CEO Steven F. Leer said the company expects to set record export shipments this year and will try to expand its export capabilities.”

I think it was the use of the phrase ‘record export shipments’ that got traders going and just the fact that the stock was already beaten up meant it was only going upwards. Add in the fact that China is still growing and eager to buy coal, and that’s reason enough for the stock to soar higher.

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