The coal industry was not as badly placed as it is now just one and a half years back. The speedy decline the industry has suffered is largely due to new stringent emission rules coming into force and the increasing usage of cheap but clean burning natural gas and other alternatives.As a result of these challenges, coal as a fuel source has gradually been pushed out with the miners suffering grievously in the process. Most of the big players have reported negative surprises over the last few quarters.As Q1 earnings releases take center stage, let’s take a hard look at how the coal industry is placed going into the earnings season. The U.S. Energy Information Administration (“EIA”) in its latest release announced a gloomy picture for coal stocks. Per EIA forecasts, coal production will decrease by 143 million short tons (MMst) or 16% in 2016 and a further 3% or 26 MMst in 2017 on a year-over-year basis. EIA also estimates that export of U.S. coal will decline by 15 MMst or 21% in 2016 and by 2 MMst or 3% in 2017.Coal usage in the U.S. electric power sector accounts for nearly 90% of total U.S. coal consumption. Per an EIA release, coal usage is expected to decline by 50MMst (7%) in 2016 as a result of mild winter weather and competition from natural gas.Coal export will be hurt by the strong dollar and higher production from global competitors who enjoy the double benefit of cheap labor and lower transportation costs. Are Positive Surprises on the Cards?In the light of weak industry fundamentals, selecting the best stocks from the coal space may appear to be a daunting task. This is where we fall back on our proprietary methodology. It’s fairly simple – stocks with the combination of a favorable Zacks Rank – Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) – and a positive Zacks Earnings ESP are the ones that are likely to surpass earnings estimates this announcement. Earnings ESP is our proprietary methodology for determining stocks that have high probability of delivering earnings surprises in their next earnings announcement. It shows the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate. Our research shows that for stocks with this combination, the chance of a positive earnings surprise is as high as 70%.Per our model, only one coal company has the right combination to deliver an earnings surprise in the first quarter of 2016.SunCoke Energy Inc. SXC has a Zacks Rank #1 and an Earnings ESP of +150.00%. The Zacks Consensus Estimate for the company’s first-quarter earnings is at 10 cents.SunCoke Energy delivered a positive earnings surprise of 220.0% last quarter. The company is scheduled to report results on Apr 27.The table below shows that the other favorably ranked coal stocks (presently carrying a Zacks #2) do not have a positive ESP to confidently propel earnings beats. Company nameTickerZacks RankNext Earnings DateESP Cloud Peak EnergyCLD25-May-160.00% Rhino Resources Partners L.P.RHNO25-May-160.00%Is there a Glimmer of Hope? At present our proprietary model does not provide much hope for investors in coal. Coal players have however not been sitting idle. In order to cope with the challenges, they’ve been cutting operating expenses, selling non-core assets, lowering production volumes, idling mines and also resorting to lay-offs. Reverse stock split has become a common practice to keep the stock listed on the exchange though it did not work for Arch Coal.With no turnaround expected in the near term, coal stocks are expected to continue to suffer this year.Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report CLOUD PEAK EGY (CLD): Free Stock Analysis Report SUNCOKE ENERGY (SXC): Free Stock Analysis Report RHINO RESOURCES (RHNO): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research