Why Cloud Peak Energy Stock Jumped 10% on Thursday

By Rich Smith Markets Fool.com

What happened

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Thursday was a good day for investors in coal miner Cloud Peak Energy (NYSE: CLD). Its stock closed up 10.4% on the day.

So what

Cloud Peak reported its fiscal Q4 2016 earnings Thursday, and they were way better than the $0.05 per-share loss that Wall Street had expected. Cloud Peak earned $0.39 per share for the quarter, a vast improvement over the $2.55 per-share loss reported in last year's Q4, and enough profit to return Cloud Peak to "the black" for the year. Total profits for 2016 were $0.35 per share (against an even larger annual loss last year).

Looking at revenue, Cloud Peak fell somewhat short, however. The company's Q4 sales of $227.9 million missed Wall Street's mark by 3%, and was down 13% year over year. On the other hand, full-year revenues of $800.4 million were down 29%, so at the very least, things got less bad for Cloud Peak as the year drew to a close.

Care for some coal? Image source: Getty Images.

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Now what

In fact, CEO Colin Marshall said as much, characterizing the coal business in Q4 as "an improving environment" in which Cloud Peak's shipments "increased ... compared to the first half." In particular, while there was a small decline in domestic shipments in Q4, Marshall noted that Q4 saw Cloud Peak resume making international deliveries "for the first time in nearly a year," and the company has contracts to ship 1.7 million tons of coal in the first half of 2017 already.

As the year progresses, Cloud Peak says it sees "a lot brighter" outlook for thermal coal in 2017. Management is guiding investors to expect to see 55 million to 60 million tons of coal shipped this year at prices of "approximately $12.22 per ton -- so $672 million to $733 million in sales -- resulting in "adjusted" earnings before interest, taxes, depreciation, and amortization (EBITDA) of between $80 million and $120 million.

That said, with interest, taxes, depreciation, and amortization likely to eat up as much as $170 million, the chances of Cloud Peak repeating 2016's performance and ending 2017 with a profit look slim.

Result: "Brighter" prospects or no, today's 10% price spike looks like a great excuse to exit the stock.

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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.