Sector Snap: Analyst Rates Coal Stocks "Buy"
Shares of Consol rose 82 cents, or 2 percent, to $41.02 in Thursday morning trading. Peabody shares climbed 60 cents to $34.61. Shares of Massey Energy jumped $1.13, or 5.1 percent, to $23.30. Foundation Coal shares gained 53 cents to $28.98.
On Wednesday Consol cut its 2009 production guidance due to weak demand. The Canonsburg, Pa.-based company said it now expects to produce 60 million tons of coal this year, down from 62 million.
Consol says production is being reduced at its Blacksville No. 2 mine in northern West Virginia. The mine's longwall ¿ a high-efficiency mining machine ¿ was idled Tuesday and will remain out of service through July 18. Consol earlier said it was idling a mine in eastern Kentucky and another in southern West Virginia July 1. The company says it plans to resume production at its Buchanan mine in southwestern Virginia in mid-July.
Based on these production cuts, Dahlman Rose analyst Daniel Scott lowered his forecast for the company's next three years, but reiterated a "Buy" rating. Scott now expects earnings before interest, taxes, depreciation and amortization at $1.29 billion, $1.48 billion and $1.48 billion for 2009, 2010 and 2011, respectively, down from $1.39 billion, $1.49 billion and $1.97 billion. Analysts polled by Thomson Reuters predict, on average, EBITDA of $1.53 billion, $1.52 billion and $1.85 billion, respectively. The company has not provided its EBITDA outlook. Scott cut his price target for the company to $47 from $48.
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