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9 Coal Stocks With Upside

Stocks in this article: NRP ARLP PVR CNX WLT CLD JRCC

2. Peabody Energy (BTU) owns majority interests in 28 coal mining operations located in the U.S. and Australia. Besides, the company also markets, brokers and trades coal. Peabody structures its operations into three mining segments -- Western U.S. and Midwestern U.S. Mining, Australian Mining, and Trading and Brokerage.

Consolidated revenue for the first quarter of 2011 was reported at $1.74 billion, increasing 15% from the year-ago period on sales of 61.2 million tons. EBITDA for the quarter rose 17% to $416.2 million. Net income during the quarter increased to $176.5 million or 65 cents per share, compared to $133.7 million or 50 cents per share in earlier year quarter. On June 7, 2011, the company paid a dividend of $0.085 per share.

Meanwhile, Peabody is seen benefitting from China's demand as the country is currently facing acute coal deficit leading to power outages. The company's CEO recently said that coal demand from India and China would escalate over the next 10 years. BTU has its interests in Indonesia and Australia and is on the lookout for assets in Africa. However, China seems to be a major opportunity and Peabody is eyeing joint ventures with four to five opportunities on hand. During 2011, China is expected to import about 70 million tons of coal, while India will import about 60 million.

For the second quarter of 2011, the company expects to benefit from increased volumes in Australia coupled with higher metallurgical and thermal coal prices. Peabody guides EBITDA in the range of $525 to $625 million and adjusted diluted earnings per share of 85 cents to $1.10. For full year 2011, the company targets EBITDA to range from $2.1 to $2.5 billion with adjusted diluted earnings per share of $3.5 to $4.5. Meanwhile, full year sales are seen between $245 and $265 million tons.

Of the 26 analysts covering the stock, 85% recommend a buy and 12% rate a hold. Data from Bloomberg has analysts predicting an average 12-month price target of $77.16, about 39.7% higher than the stock's recent price.

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