Commodities & Metals

Rise in Coal Stocks Leads Energy Sector (JRCC, ANR, WLT, ACI, BTU, CNX, CLD, KOL)

Yesterday’s FOMC decision to provide more stimulus for the U.S. economy pushed stocks higher in every sector. The energy sector has done better than most as investors believe that economic growth will increase the demand for energy. And coal miners are the best performing part of the energy sector, up about 4.5% so far this morning.

Coal also gets a boost from declining natural gas production and rising prices for natural gas. As usual, the whole story is a bit more complicated than that. First, a look at how coal miners are faring today.

James River Coal Co. (NASDAQ: JRCC) is up 11.4% at $3.52 in a 52-week range of $1.68 to $11.52.

Alpha Natural Resources Inc. (NYSE: ANR) is up 7.2% at $8.82 in a 52-week range of $5.28 to $30.66.

Walter Energy Inc. (NYSE: WLT) is up 4.9% at $38.53 in a 52-week range of $29.75 to $85.14.

Arch Coal Inc. (NYSE: ACI) is up 6.9% at $7.90 in a 52-week range of $5.16 to $20.37.

Peabody Energy Corp. (NYSE: BTU) is up 3.8% at $25.79 in a 52-week range of $18.78 to $47.90.

CONSOL Energy Inc. (NYSE: CNX) is up 2.2% at $33.20 in a 52-week range of $26.41 to $46.90.

Cloud Peak Energy Inc. (NYSE: CLD) is up 0.2% at $19.78 in a 52-week range of $13.65 to $24.34.

The Market Vectors Coal ETF (NYSEMKT: KOL) is up 4.8% at $25.80 in a 52-week range of $21.49 to $40.90.

Over the past month, every one of these stocks is up, with James River gaining the most (38%) and CONSOL the least (5%), with most of the gains coming in the last 6 or 7 days. For the past 12 months, however, only Cloud Peak shows a share price gain, and that of just 5%. Alpha is down 70% in the past 12 months.

So have the coal miners bounced off a bottom? Investors seem to think so. But look at some of the short interest in these miners: Alpha, 19.4% of shares short; James River, 20% shares short; and Arch, 20.8% shares short.

And the prospects for some of the coal miners aren’t really so hot either. Alpha is saddled with debt from its acquisition of Massey and the company’s metallurgical coal business — which is the more costly variety used in steelmaking — amounts to only about 20% to 25% of the company’s shipments. James River’s met coal business is weak and thermal coal prices aren’t rising very fast. Arch Coal’s assets in Appalachia have weighed on the company, but hopes are rising on expected demand increases from China.

Coal miners also benefited from a late August federal court ruling that struck down regulations limiting power plant pollution that drifts to nearby states.

The coal miners are feeling better today, but none is cured of long-running ailments. We could be seeing the beginning of a comeback, but a relapse is certainly not out of the picture.

Paul Ausick

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