Arch Resources (ARCH) Surges 10.2%: Is This an Indication of Further Gains?

Arch Resources (ARCH) shares soared 10.2% in the last trading session to close at $157.68. The move was backed by solid volume with far more shares changing hands than in a normal session. This compares to the stock's 32.1% gain over the past four weeks.

Arch Resources fourth-quarter earnings are better than expected due to an improvement in selling prices and year-over-year increase in coal sales volume.  Strong production volumes from the high-quality, low cost Leer South longwall metallurgical mine will assist the company to tap the rising demand of met coal.

Arch Resources has significant long-term coal supply contracts at fixed prices, which gives a clear picture of its future sales volume and revenues. Arch Resources will relaunch its capital return program in the second quarter of 2022, which will increase value to its stockholders.

This coal producer is expected to post quarterly earnings of $9.76 per share in its upcoming report, which represents a year-over-year change of +2540%. Revenues are expected to be $649 million, up 81.5% from the year-ago quarter.

Earnings and revenue growth expectations certainly give a good sense of the potential strength in a stock, but empirical research shows that trends in earnings estimate revisions are strongly correlated with near-term stock price movements.

For Arch Resources, the consensus EPS estimate for the quarter has been revised 14.4% lower over the last 30 days to the current level. And a negative trend in earnings estimate revisions doesn't usually translate into price appreciation. So, make sure to keep an eye on ARCH going forward to see if this recent jump can turn into more strength down the road.

The stock currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>>

Arch Resources is a member of the Zacks Coal industry. One other stock in the same industry, SunCoke Energy (SXC), finished the last trading session 3.5% higher at $8.87. SXC has returned 9.6% over the past month.

For SunCoke, the consensus EPS estimate for the upcoming report has remained unchanged over the past month at $0.21. This represents a change of +5% from what the company reported a year ago. SunCoke currently has a Zacks Rank of #3 (Hold).

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