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SunCoke (SXC) Beats on Q1 Earnings & Revenue Estimates

Coal producer, SunCoke Energy Inc. SXC posted first-quarter 2016 adjusted earnings of 5 cents per share, outpacing the Zacks Consensus Estimate by a penny. Reported earnings, however, slumped 16.7% year over year.

SunCoke Energy reported a GAAP loss of 6 cents per share, mostly flat with the prior-year quarter figure. The difference between GAAP and operating results was due to a $10.7 million asset impairment charge.

Total Revenue

In the quarter under review, SunCoke Energy’s total revenue fell nearly 4% to $311.1 million from $324 million a year ago. The downside is attributable to the pass-through of lower coal prices at the Domestic Coke segment, partially offset by an increase in sales volumes. Revenues surpassed the Zacks Consensus Estimate of $269 million by 15.7%.

Highlights of the Release

Total costs and operating expenses in the reported quarter fell 2.5% to $290.9 million (excluding asset impairments of $10.7 million) from $298.5 million a year ago. The decrease was due to lower cost of products sold and operating expenses.

The company reported total adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”) of $53 million, up 10.6% from the year-ago level. The upside was driven bycontributions from the Convent Marine Terminal (“CMT”) and improved performance at Indiana Harbor.

SunCoke Energy’s interest expenses remained relatively flat at $14 million in the quarter under review.

Segment Highlights

Domestic Coke: Adjusted EBITDA increased 3% to $54.3 million primarily due to outperformance at the Indiana Harbor facility. Domestic coke-sales volume in the reported quarter was 1,000 thousand tons, up by 50 thousands ton from a year ago.

Coal Logistics: Adjusted EBITDA surged 481% to $15.1 million owing to contributions from the CMT.

Brazil Coke: Adjusted EBITDA plunged 43.9% to $2.3 million. Brazilian coke production was down 5.5% to 415 thousand tons.

Coal Mining:Adjusted loss before interest, tax, depreciation & amortization was $4.1 million in the reported quarter compared to the year-ago loss of $3.1 million. Loss widened primarily due to lower coal prices resulting from persistently depressed market conditions.

Corporate & Other:In the quarter under review, corporate and other expenses, including legacy costs, were $14.6 million, up 73.8% from the prior-year level primarily due to costs related to some legal proceedings.Besides that,the first quarter of 2015 was favorably impacted by a $4.0 million post-retirement benefit plan curtailment gain.

Financial Position

Cash and cash equivalents were $101.8 million as of Mar 31, 2016, compared with $123.4 million as of Dec 31, 2015. Long-term debt was $944.8 million as of Mar 31, 2016, compared with $997.7 million as of Dec 31, 2015.

In the three months ended Mar 31, 2016, SunCoke Energy’s net cash from operating activities increased to $29.4 million from $11.1 million in the prior-year period. The company’s capital expenditure increased 66.3% to $13.8 million from $8.3 million a year ago.

Guidance

For 2016, SunCoke Energy expects consolidated adjusted EBITDA in the range of $210–$235 million.

Adjusted EBITDA attributable to SunCoke Energy’s shareholder is expected in the range of $105–$124 million, reflecting the impact of public ownership in SunCoke Energy Partners, L.P. SXCP.

The company expects domestic coke production of 4.0–4.1 million tons.

Capital expenditure is estimated to be nearly $45 million.

Cash from operations is expected in the range of $150 million to $170 million.

Peer Releases

Alliance Resource Partners LP ARLP reported adjusted earnings of 36 cents, lagging the Zacks consensus Estimates of 41 cents by 12.2%.

CONSOL Energy Inc. CNX reported operating loss of 7 cents, narrower than the Zacks consensus Estimates of a loss of 9 cents.

Zacks Rank

SunCoke Energy currently sports a Zacks Rank #1 (Strong Buy).

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