Why CONSOL Energy Inc. Stock Dropped 7% on Tuesday

By Rich Smith Markets Fool.com

Image source: Getty Images.

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What happened

Shares of coal miner CONSOL Energy (NYSE: CNX)dropped nearly 12% in early Tuesday trading, before ending the day off by a less drastic 7.4% decline.

So what

CONSOL appears to have disappointed investors with its fourth-quarter earningsresults today. Reporting losses of $301.6 million on revenue of $462 million, the company underperformed relative to last year's Q4 earnings ($34.3 million) and revenue ($666 million) alike. Given that analysts had predictedCONSOL would take in revenue of $605 million, and earn at least a de minimis profit ($0.01 per share, pro forma) on that revenue, investors' disappointment is understandable. As it turned out, even calculated pro forma and without accounting for hedging losses, CONSOL's results barely broke even.

In its report, CONSOL management attempted to shift investors' focus away from its GAAP numbers (not even mentioning GAAP until the third paragraph of the release), and focus on cash production instead. But even in that regard, the news wasn't great: CONSOL generated $83 million in operating cash flow in Q4 -- a 19% decline year over year.

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Now what

Clearly, Trump presidency or no Trump presidency, the coal business isn't reviving itself anywhere near as fast as CONSOL would like to see. Accordingly, CONSOL advises that it is proceeding with plans to divest its coal business and focus on exploration and production of natural gas and oil instead.

Management has not yet decided whether to try to sell its coal operations, or simply spin them off to its own shareholders as a separate entity. In any case, a decision is expected to comeas early as this year.

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Rich Smith has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.