Coal Producers Fizzle on Poor Manufacturing Data

NEW YORK (TheStreet) -- Coal producers Walt Energy (WLT), Peabody Energy (BTU) and Alpha Natural Resources (ANR) plummeted on sluggish January manufacturing data, sparking concerns an extended slowdown would hit the U.S. economy. By midafternoon, Walt Energy had dumped 7% to $10.57, Peabody had taken off 2.8% to $16.58, and Alpha Natural Resources had tumbled 6.3% to $5.32.

The S&P 500 had sunk 1.95% to 1,747.76 by Monday afternoon on the back of weak U.S. manufacturing data and poor auto sales.

Earlier, the Institute for Supply Management said manufacturing growth in the U.S. over January had dropped to 51.3 from 56.5 in December, an eight-month low. Analysts surveyed by Bloomberg had expected an average of 56 over the month.

New order growth, meanwhile, fell by the most in 33 years to 51.2 from 64.4.

Adding to concerns of a weakening national economy, Ford (F) and General Motors (GM) reported worse-than-expected auto sales over January. Ford said unit sales plummeted 7.1% to 154,000, while General Motors' unit sales sunk 12% to 171,000. The automakers blamed wintery weather and icy conditions over the last month for a lack of customers.

WLT Chart WLT data by YCharts

TheStreet Ratings team rates WALTER ENERGY INC as a Sell with a ratings score of D. The team has this to say about their recommendation:

"We rate WALTER ENERGY INC (WLT) a SELL. This is driven by multiple weaknesses, 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, generally disappointing historical performance in the stock itself and generally high debt management risk."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The gross profit margin for WALTER ENERGY INC is currently extremely low, coming in at 10.04%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -22.09% is significantly below that of the industry average.
  • Net operating cash flow has significantly decreased to -$19.92 million or 181.50% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • WLT'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 68.45%, 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 debt-to-equity ratio is very high at 3.36 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Even though the debt-to-equity ratio is weak, WLT's quick ratio is somewhat strong at 1.18, demonstrating the ability to handle short-term liquidity needs.
  • 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 Metals & Mining industry and the overall market, WALTER ENERGY INC's return on equity significantly trails that of both the industry average and the S&P 500.

TheStreet Ratings team rates PEABODY ENERGY CORP as a Sell with a ratings score of D+. The team has this to say about their recommendation:

"We rate PEABODY ENERGY CORP (BTU) a SELL. This is driven by several weaknesses, 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 generally high debt management risk, poor profit margins and generally disappointing historical performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Currently the debt-to-equity ratio of 1.52 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. To add to this, BTU has a quick ratio of 0.56, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
  • The gross profit margin for PEABODY ENERGY CORP is rather low; currently it is at 15.23%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -32.45% is significantly below that of the industry average.
  • BTU'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 32.09%, 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 return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, PEABODY ENERGY CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • BTU, with its decline in revenue, underperformed when compared the industry average of 1.4%. Since the same quarter one year prior, revenues fell by 13.6%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.

TheStreet Ratings team rates ALPHA NATURAL RESOURCES INC as a Sell with a ratings score of D. The team has this to say about their recommendation:

"We rate ALPHA NATURAL RESOURCES INC (ANR) a SELL. This is driven by a few notable weaknesses, 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 unimpressive growth in net income, weak operating cash flow, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 893.0% when compared to the same quarter one year ago, falling from -$46.15 million to -$458.24 million.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 32.06%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 885.71% compared to the year-earlier 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.
  • Net operating cash flow has decreased to $111.08 million or 34.77% when compared to the same quarter last year. Despite a decrease in cash flow of 34.77%, ALPHA NATURAL RESOURCES INC is in line with the industry average cash flow growth rate of -44.35%.
  • ALPHA NATURAL RESOURCES INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, ALPHA NATURAL RESOURCES INC reported poor results of -$11.06 versus -$3.25 in the prior year. This year, the market expects an improvement in earnings (-$2.29 versus -$11.06).
  • 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.

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