My day-to-day is busy, so I don’t get to listen to earnings calls live very often. But for the sake of the Global Energy Crisis and our Fortune Research Weekly Watchlist I made an exception.
Coal producer Arch Resources Inc. (NYSE: ARCH) kicked off the industry’s earnings season by releasing Q3 results Tuesday morning.
By the numbers, it looked kind of “meh” at the outset, beating on revenue but missing on earnings per share.
Source: Bloomberg
Once the analysts started to ask questions, though, things got juicy…
The company has already committed 400,000 domestic tons of metallurgical coal, which isn’t a whole lot.
But they sold it forward at $230 per ton… which is a huge number.
Then they updated their thermal coal outlook for 2016. As it turns out, they are completely sold out of all 70 million tons of their Powder River Basin (PRB) production…
And all of it was priced at $16, which is an all-time high for PRB annual contracts.
ARCH mines that production at around $11 per ton, which means they’ll clear over $350 million in gross profit in 2022 from that one mine alone.
And when we add in their massive metallurgical coal production at those implied prices, total gross profit for 2022 could be as much as $1.8 BILLION.
Source: Bloomberg, Fortune Research
That’s $300 million GREATER than their current market cap.
And if that holds up, it implies earnings per diluted share next year that are nearly three times greater than the quarter they just posted of $6.60.
A Free Trade AND a Fortune Research Weekly Watchlist for Oct. 26, 2021
Believe it or not, shares have barely budged relative to Monday’s close because the Street is asleep at the wheel.
That means it’s a great day to pick up some ARCH as a Fortune Research FREE TRADE.
And it also means the other coal plays — Peabody Energy Corp. (NYSE: BTU) and CONSOL Energy Inc. (NYSE: CEIX) should do well too.
As to our weekly watchlist, gone are JPM, MARA and CAR, which absolutely crushed it this past week, up as much as 15% before pulling back to up 7%.
Being added to the weekly watchlist are ARCH and a financial ETF I believe will fare well as smaller-cap equities continue to ramp up through earnings season — the SPDR S&P Regional Banking ETF (NYSEArca: KRE).
Source: Bloomberg, Fortune Research
Updated watchlist is above… keep buying on red and selling on green.
All the best,
Matt Warder
Fortune Research
P.S. The last time the FDA made a call like this, one unsuspecting biotech ticker nearly tripled in eight days… And another cheap stock is poised to pop!
New Money Crew Head Trader Lance Ippolito bagged a 175% gain in a matter of eight days last time he spotted a trade just like this.
But Lance says that could be small potatoes compared to what’s possible on this biotech stock.
And it’s not too late to get in!
So be sure to check out how this latest FDA decision could be worth upward of $100,000,000, supercharging one $28 stock by the end of October…
