NEW YORK ( TheStreet) -- Peabody Energy ( BTU), Consol Energy ( CNX) and International Coal Group ( ICO) are three coal companies getting a lift from the current industry scenario and robust company fundamentals.

Industry analysts see coal prices breaking to the upside in a few months as Australia's devastating floods have disrupted coal production. The wet weather could push coal prices higher, boosting coal producers' profits around the world. Exacerbating the concerns, South African coal shipments have slowed down as severe monsoon rainfall has hampered transportation and logistics.

The coal shortages and supply disruptions arrive at a time when global demand is on a roll. In such a scenario, coal stocks seem to be a good buy. Daniel Rice, a fund manager at BlackRock, foresees coal stocks doubling as oil prices are close to topping $100 a barrel.

Rice is bullish on the coal sector and five of his top 10 holdings represent coal stocks. Meanwhile, FBR Capital Markets has raised its 2011 and 2012 coal prices by 9.5% and 5.8%, respectively, with steam coal prices rising on higher exports and natural gas price forecasts.

Historically, the East Coast of the U.S. and Gulf ports, which are filled with coking and crossover coking coal exports, were used minimally, but in the current scenario they seem attractive. The Gulf ports are natural export facilities for the Illinois Basin coal. Based on all these factors, JPMorgan has raised its 2011 coking coal price forecast from $211 per tonne to $220 per tonne, while seaborne thermal coal prices have been increased to $120 per tonne from $101 per tonne.

As steel demand is likely to soar to record highs in 2011, JPMorgan estimates strong international demand for coal in the upcoming months. It foresees a dramatic increase in merger and acquisition activity in the industry with foreign steel producers seeking secure coal supplies. Analysts expect U.S. coal exports could act as a safety valve, given the situation in which the flood-stricken Australian coal sector has purged coal from world markets.

Our three coal stock picks are stacked as per implied upside, great to greatest.

International Coal produces coal in the northern and central Appalachia, low-to-medium sulfur steam and metallurgical coal. The company also has a complimentary mining complex of mid-to-high sulfur steam coal in the Illinois Basin. Of the eight analysts covering the stock, 75% recommend a buy, while the remaining suggest a hold. Analysts polled by Bloomberg estimate a 22.6% upside from current levels.

With mines spread across Illinois, Kentucky, West Virginia, Maryland and Virginia, the company controls almost 1.1 billion tons of coal reserves, out of which some is steelmaking coal.

As per a JPMorgan research report, the company's strategy of restoring its coking coal reserves may improve profitability. Additionally, the sustained effort to convert debt into equity proves to be a fundamentally strong point for investing. Further, the earlier-than-expected start of work at the company's Tygart mine improves prospects.

Looking ahead into the fourth quarter, analysts polled by Bloomberg expect the company to report earnings of 8 cents a share vs. a loss of 7 cents recorded a year earlier. For full year 2010, earnings per share are pegged at 28 cents; for 2011 they are pegged at 60 cents. The company earned 14 cents a share in 2009.

Recent reports surfaced of Massey Energy ( MEE) negotiating a potential takeover of International Coal. If the two entities combine, the synergies out of the deal may sharpen market competition. Massey is likely to benefit from International Coal's mining operations and reserves, which are strategically located to serve its client base of utility, metallurgical and industrial customers spread throughout the eastern U.S., according to Massey management.

Peabody Energy is a coal company with major stakes in almost 28 coal mining companies in the U.S. and Australia. The company's three segments are made up of mining operations while it also has a coal trading and brokerage segment. Of the 25 analysts covering the stock, 84% recommend a buy, while 12% suggest a hold. Analysts polled by Bloomberg estimate a 15.9% upside from current levels.

As per a report from Standard & Poor's, Peabody is likely to record a jump of more than 16% in revenue during 2010 and another equivalent or greater rise in 2011. The company says flooding in Australia could decline 2010 earnings before interest, taxes, depreciation and amortization to the midpoint of its estimates of $1.7 billion to $1.9 billion. Nonetheless, BTU's long-term Australian platform continues to grow with expansions in both thermal and metallurgical coal mines with an annual production of 15 million to 20 million tonnes.

At the end of 2010, Peabody Energy announced a five-year agreement with Indonesia-based PT Supra Bara Energi for sourcing coal to meet the robust demand growth in China, India and other key Asian markets.

Indonesia is a major supplier of coal to the Pacific Rim with 90% of forecasted world coal demand arising out of this region. China's coal demand is expected to surge in the upcoming five years to touch 3.8 billion tonnes by 2015, according to the China Coal Association.

Peabody is well-positioned to meet the demand for thermal and metallurgical coal, given its strong production levels and access to the fastest-growing markets globally.

CONSOL Energy operates in the two segments of coal and gas. It is a multi-fuel energy producer and energy services provider, addressing the U.S. electric power generation industry. Of the 24 analysts covering the stock, 71% recommend a buy, while 21% suggest a hold. Analysts polled by Bloomberg estimate an 11.2% upside from current levels.

For the fourth quarter, the company reported an 8.4% increase in coal production to 16.8 million tonnes - the highest in 2010 -- and also a record 44% year-over-year surge in natural gas output to 36.2 billion cubic feet. Looking ahead, Consol estimates 2011 production between 59 and 61 million tonnes.

CNX expects to benefit from the growing international demand for metallurgical, which has been hit by Australia flooding, a company spokesperson added. In the aftermath, analysts expect a significant spike in coking coal prices and estimate a 33% jump. In such a scenario U.S. producers can leverage this opportunity and replace Australian coal.

A colder winter in the U.S. and Europe is supporting thermal coal demand. The outlook remains strong due to tightening inventories and expanding industrial activity. In the company's latest third quarter, Consol's thermal coal sales rose 7% to 13.9 million tonnes.

In November, Consol's chief financial officer said the company would take a decision on selling 340 million tonnes of metallurgical coal reserves in Central Appalachia by the end of this month. He further added that the company may receive as much as $150 per tonne by entering into a joint venture with another company, or developing the reserves by itself. Consol's plan to expand its additional Marcellus acreage indicates a strong reserve base.
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