Similar Results, Different Outcomes (MDU, MEE)

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There are two companies which have reported earnings where the reactions to the same sort of news were entirely different.  Here are the reports at MDU Resources (NYSE:MDU) and Massey Energy (NYSE:MEE).

Less than three months ago, electricity distributor MDU Resources(NYSE:MDU) increased its full year EPS guidance from $1.85-$2.10 to$2.10-$2.35. This morning when the company released third-quarterearnings, it lowered its 2008 guidance to a $1.95-$2.10. Atthe time MDU issued guidance, natural gas prices were above $9/thousandcubic feet; today’s price is under $7/thousand cubic feet. Crude priceshave fallen even further.

EPS for the quarter missed analysts’ estimates of $0.67 by threepennies, and revenue were only a bit lower than expected. But MDUofficials blundered in August and the company is paying for it today.The share price is down more than 4% so far today.

After the market closed yesterday, coal-supplier Massey Energy(NYSE:MEE) reported third quarter earnings of $0.64 EPS on revenues of$763 million. Analysts expected EPS of $0.73 and revenues of $771million. But the company’s year-over-year increases were startling: EPSnearly tripled and revenues were up more than 26%.

Massey indicated guidance on shipped coal for 2008 will be at thebottom of its earlier estimates, and that average prices would be about$1/ton lower. Cash costs per ton remained about the same. For 2009,Massey stuck with previous estimates on shipments, but lowered the topof is average price by $10/ton and lowered its cash costs by $4-$6/ton.

The lukewarm guidance hasn’t hurt the share price today. Massey stock is up more than 10% mid-morning.

Massey is very far off of highs to the tune of almost 75% and it sellsto utilities.  MDU has "only" been cut almost in half.  It seems thatwith the beaten up energy supplier sector in coal or oil or gas thatthe stocks are getting more of a pass.  Maybe the market is finallystarting to factor the bad news in at current prices.

Paul Ausick
October 31, 2008