NEW YORK (TheStreet) -- Alpha Natural Resources (ANR) shares are up 7.1% to $4.59 on Monday following a positive note by analysts at Morgan Stanley (MS - Get Report) concerning met coal prices.
The firm believes that as thermal coal inventories diminish, prices will rise.
"The recent polar vortex and extreme cold has pulled forward a recovery in the thermal coal market. Inventories have been falling rapidly, and could dip below 100 mt for the first time since 1997," said analyst Evan Kurtz.
Fellow coal producers Peabody Energy (BTU - Get Report) +2.2%, Walter Energy (WLT) +5.1% and Arch Coal (ACI - Get Report) +5.1% all received bumps thanks to the note.
TheStreet Ratings team rates ALPHA NATURAL RESOURCES INC as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:
"We rate ALPHA NATURAL RESOURCES INC (ANR) a SELL. This is driven by a number of negative factors, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its poor profit margins, weak operating cash flow and generally disappointing historical performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
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- The gross profit margin for ALPHA NATURAL RESOURCES INC is currently extremely low, coming in at 5.92%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -5.00% is significantly below that of the industry average.
- Net operating cash flow has significantly decreased to -$53.96 million or 182.51% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- ANR's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 40.64%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, ALPHA NATURAL RESOURCES INC's return on equity significantly trails that of both the industry average and the S&P 500.
- ANR, with its decline in revenue, underperformed when compared the industry average of 3.1%. Since the same quarter one year prior, revenues fell by 16.6%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- You can view the full analysis from the report here: ANR Ratings Report