Bear Of The Day: CNX Coal Resources

Low natural gas prices continue to weigh on coal, leading to rising inventories and declining prices. Coal demand and prices are expected to continue their downward trend with rising awareness about its harmful impact on the environment, regulatory pressures and supply glut.
 
About the Company
 
Headquartered in Canonsburg, PA, CNX Coal Resources (CNXC) manages and develops thermal coal operations in Pennsylvania. The company is structured as a Master Limited Partnership (MLP) that owns 20% interest in and operation control over Consol Energy’s Pennsylvania mining complex.
 
Disappointing Q4 Results
 
On Jan 28, the company reported adjusted earnings of $0.37 per unit for Q4 2015, 26% short of the Zacks Consensus Estimate of $0.50. Poor performance was attributable mainly to unusually warm winter and low natural gas prices, which reduced the demand for coal for power generation. Total revenues declined 31% year over year to $54.4 million. Revenues also missed the Zacks Consensus Estimate of $60 million.

Coal production declined 30.8% year over year due to the decreasing demand and depressed commodity price environment, which continue to hurt the coal industry.

Falling Estimates 
 
Due to weak outlook, analysts have revised their estimates for the company downwards. Zacks Consensus Estimates for the current and the next fiscal year are $1.15 per unit and $1.59 per unit respectively, sharply down from $1.63 and $2.13 per share, before the results.
 
The Bottom Line
 
Poor quarterly results reflect rising challenges for the company and the industry. Coal industry is currently ranked 195 out of 265 Zacks industries (bottom 26%). In view of the weak outlook, it is safer to stay away from this industry for the time being.