This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Cloud Peak Energy Needs to Blow Off Some Steam

NEW YORK ( TheStreet) -- In November, I marveled at the across-the-board cheap valuations of coal stocks. These companies were cheap for a reason, including Cloud Peak Energy (CLD - Get Report), which (in November) fell below its reported book value.

Since that article, Cloud Peak's stock price's course has seen no valleys, which pretty much affirms my belief that the only way to consistently make money in commodity-driven industries is to swim against the current. While pundits were beating the drum on TV and print about what a poor industry coal was, Cloud Peak investors took advantage.

Truth be told, I've had my doubts. It's true there are some positive signs that the industry is beginning to rebound. It's still an open question as to whether Cloud Peak is better positioned than Arch Coal (ACI) or Alpha Natural Resources (ANR) to fully capitalize on the rebound.

While I was more than willing to give management the benefit of the doubt that it had done enough to address legitimate operating challenges, there is plenty to prevent me from buying this stock. For instance, last year the company sold roughly 4 million tons of 2013 coal production for less than $10 per ton.

The Street didn't seem to mind; management now had near-term liquidity for other maneuvering. But I didn't believe it made sense to sell such a high volume below cost. Although the company ended up with some cash, they lost money given that cost per ton was going for more than $10 at the time.

In the very next quarter, pundits seemed stunned that the company's earnings-per-share declined 60% year-over-year, while product margins and average cost of coal (per ton) fell 21% and 10%, respectively. Essentially, management got some near-term capital relief in June, only to see the stock/investors pay the price four months later because it missed out on a narrower-than-expected loss.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
CLD $6.13 -0.49%
AAPL $129.62 -2.20%
FB $79.34 -1.50%
GOOG $532.32 -1.44%
TSLA $247.46 -0.11%

Markets

DOW 18,041.54 -190.48 -1.04%
S&P 500 2,104.20 -21.86 -1.03%
NASDAQ 5,032.7510 -56.6110 -1.11%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs