Met Warrior (NYSE: HCC) released first-quarter results after Thursday’s close, missing earnings expectations and generate mixed cash flow, while increasing cost and investment forecasts:
- Earnings – the company posted adjusted earnings per share of $2.97 for the first quarter, versus Street estimates of $3.76; shipping delays reduced adjusted net income by 63c.
- Free Cash Flow – Warrior (HCC) generated $49.7 million in free cash flow (2.8% of current market cap); taking into account the impact of changes in net working capital, free cash flow was $208.7 (12.1% of current market capitalization).
- Capital allocation – the board had previously announced a regular dividend of 6c and a “special May 2022” dividend of 50c; opportunistic share buybacks remain at the discretion of the Board.
- Guide – given previously announced plans to restart the Blue Creek project, management lifted capital expenditure and mine development guidance; Cash cost and SG&A forecasts have also been increased.
There was no update on the ongoing strike; however, Blackrock (BLK) recently released a statement suggesting that it is in investors’ best interests for management to reach a resolution. Further stating that “we do not believe key executives should be rewarded when the company has been adversely affected by the ongoing labor dispute”.
First quarter results were heavily impacted by logistics headwinds. A theme that has frequently emerged throughout the first quarter earnings season. Delayed shipments increased working capital and reduced cash flow; however, management appears confident that delayed volumes will move into the second quarter. Adjusted for first quarter logistics delays/working capital headwinds, the company generated very strong free cash flow. As a result, strong second quarter earnings and cash flow should offset any first quarter weakness. That said, rising costs and investment forecasts could be a headwind for equities.