Zacks Industry Outlook Highlights: Peabody Energy, Arch Coal and Rio Tinto

Zacks.com announces the latest Industry Outlook. Today's outlook from Zacks Equity Research analyst Neil Malkin discusses the Coal sector. Highlighted stocks include: Peabody Energy (NYSE: BTU), Arch Coal Inc. (NYSE: ACI) and Rio Tinto (NYSE: RTP).

Here is the latest on the Coal sector:

We like companies with exposure to the international coal markets as well as the Powder River Basin (PRB) in the U.S. Companies like Peabody Energy (NYSE: BTU) and Arch Coal Inc. (NYSE: ACI) look attractive currently. Both of which have recently engaged in long-term growth acquisitions.

Peabody is the largest pure-play coal producer, with significant leverage to the Australian export market. Due to the high quality of coal produced and its proximity to Asia (emerging markets) Australian seaborne coal trades at premium to all other coals. Peabody would benefit especially when China and other Asian emerging markets begin to rebound. The stimulus packages enacted by the federal government during the recent months should start to pay dividends toward the end of '09.

Arch Coal has a significant amount of reserves and is a top-three producer in the PRB. In our opinion, PRB coal will be in great demand over the coming years. The significant coal-fired power plant build-out will increase annual thermal coal demand by more than 60 MM tons; approximately 50% of this new demand will be met by PRB supply. Its likely acquisition of Rio Tinto’s (NYSE: RTP) Jacobs Mine will increase ACI’s PRB market share while gaining operating synergies.

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