Sector Snap: Analyst Rates Coal Stocks "Buy"

NEW YORK (AP) — The coal mining sector will struggle under constrained volumes for the rest of the year, but should rebound in 2010 on a strong price recovery, said an analyst on Thursday who reiterated his "Buy" rating for a number of coal stocks.

Stifel Nicolaus & Co analyst Paul Forward predicted dismal second-quarter and full-year results driven by lower shipping volumes and the fact that most firms have the majority of their planned coal production committed, leaving few opportunities to gain from price strengthening.

Demand for all types of coal has continued to remain very weak, but the sector has responded quickly by cutting domestic coal production, a move that could prompt an eventual recovery in coal pricing, Forward said.

Forward expects a strong rebound in prices in 2010 and 2011, led by coal from the Appalachians due to its exposure to export markets, with other regions trailing behind.

He reiterated his "Buy" rating for Consol Energy Inc., Peabody Energy Corp., Massey Energy Co. and Foundation Coal Holdings Inc., with price targets of $40.16, $34.01, $22.18 and $28.45, respectively.