Dahlman Rose Cuts Coal Stocks Estimates After Stress Tests

Dahlman Rose analyst Daniel Scott lowered his price targets on half a dozen coal stocks today to reflect stress test results. In a note out today, he wrote that after publishing stress test results for thermal and met coal in the past three weeks, “one of the biggest takeaways was that open tonnage on the [...]

Dahlman Rose analyst Daniel Scott lowered his price targets on half a dozen coal stocks today to reflect stress test results.

In a note out today, he wrote that after publishing stress test results for  thermal and met coal in the past three weeks, “one of the biggest takeaways was that open tonnage on the thermal side this year is unlikely to be contracted, while export comps will become more and more difficult as the year progresses. The good news is that we are seeing indications that met coal pricing may have hit an inflection point, and remain comfortable with our full-year average $220/mt FOB hard cokingcoal price deck….We have taken this opportunity to all but zero out unsold thermal tonnage in 2012, boost cost assumptions to near the top of guidance ranges, and lower our 2013 sales assumptions for both tonnage and realized price. We have lowered our price deck for the PRB to $13/ton next year for 8,800 Btu/lb coal, down from $14.50/ton previously. We are lowering our price deck for CAPP to $72/ton next year form $78/ton previously. We are assuming NAPP discounts of $8/ton off of CAPP pricing. Finally, we have assumed at or near the top of cost guidance for all companies based on lower volumes.

Scott writes that he expects the coming earnings season will see “widespread sales guidance lowering and cost pressures, as not only unbooked tonnage but also existing sales come under pressure from weak gas prices, weak demand and mild weather.” However, he is encouraged that prices for global seaborne met coal may be firming and lists Peabody (BTU) and Walter Energy (WLT) as his top picks.

Still, he lowered his price target on Peabody by $3 to $45 and his target on Walter by $2 to $70. Other companies, all of which Scott rates at Buy, also got price target cuts: Arch Coal (ACI) went from $20 to $25, Alpha Natural Resources (ANR) went from $27 to $19, Cloud Peak Energy (CLD) went from $28 to $25, and Consol Energy (CNX) went from $41 to $40.

Data & News supplied by www.cloudquote.io
Stock quotes supplied by Barchart
Quotes delayed at least 20 minutes.
By accessing this page, you agree to the following
Privacy Policy and Terms and Conditions.