Cloud Peak Energy Is Still Stuck in a Valley

NEW YORK (TheStreet) -- If you ever doubted the Street's pessimism towards any sustainable recovery in the coal industry, just take a look at shares of Cloud Peak Energy (CLD). Not only are they down 16% on the year, but last week the stock fell below $16.03, which is the company's last reported book value.

Without getting too technical, what this means is that if Cloud Peak, which is the fourth-largest U.S. coal producer, went out of business today and liquidated its assets, shareholders would be left with pieces of the company that are not currently "carrying their weight" on the balance sheet. Clearly, the Street has no confidence in this business.

While these shares suddenly appear more attractive when compared to other downtrodden commodity names like Arch Coal (ACI) and Consol Energy (CNX), unlike the 50% jump Alpha Natural Resources (ANR) has enjoyed the past couple of months, Cloud Peak stock has yet to bottom.

The question is how much of the Street's lack of confidence is based on the overall future of coal versus Cloud Peak's underlying weaknesses in operations. And I worry that absent meaningful signs of improvement in execution by management, cheap or not, Cloud Peak investors placing a bet here may be stuck in this valley for the foreseeable future.

All of that said, current investors can certainly hang their hats on the fact that the stock has only lost 17% since January 2012. On a relative basis, I consider this a "win" compared to Alpha Natural Resources' 65% decline during that same span.

However, given the fact that investments are about the future and not the past, this is where the comparisons to Alpha Natural Resources should end -- at least, for the next couple of quarters.

While I'm slightly more bullish than most on Alpha Natural's prospects, I'm not going to tell you that the company is better than Cloud Peak. Cloud Peak did reveal some positive signs in its third-quarter earnings report, including posting a 2-cent beat in earnings-per-share estimates. Nonetheless, I was disappointed the company's wasn't able to capitalize from the recent recovery in natural gas prices. This is while posting revenue of $375 million, which missed Street estimates by $10 million.

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