Despite Current Conditions Coal Sector Seen as “Oversold“
NEW YORK, NY -- (Marketwire) -- 05/25/12 -- Coal demand has dropped drastically this year and as a result coal stocks have fallen sharply. A warm winter, stricter regulations, and an increasing number of power plant switching to natural gas from coal have all been contributing factors to coal's slide. Despite current conditions Sterne Agee analysts have recently published a note saying the sector is "oversold" according to a recent Baron's article. The Paragon Report examines investing opportunities in Coal Industry and provides equity research on Alpha Natural Resources, Inc. (NYSE: ANR) and Peabody Energy Corporation (NYSE: BTU).
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"Despite an accelerated risk-off trade, recent data are encouraging. Shares appear underpriced and reflect a much more onerous thermal and met-coal pricing scenario," wrote Sterne Agee analyst Michael Dudas. The health of the coal industry hasn't worsened in recent weeks as stocks have fallen on growing global economic concerns. "Certainly, the equity selloff has been non-discriminatory for the most part, not fully reflecting quality, liquidity and product mix differentials," Dudas wrote in a note to investors. He has recently recommended clients to increase holdings of Alpha Natural Resources, Peabody Energy, Consol Energy and James River Coal according to an Associated Press article earlier this week.
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With $7.1 billion in total revenue in 2011, Alpha Natural Resources ranks as America's second-largest coal producer by revenue and third-largest by production. Alpha is the nation's largest supplier of metallurgical coal used in the steel-making process and is a major supplier of thermal coal to electric utilities and manufacturing industries. The company recently reported a first quarter net loss of $29.1 million or $0.13 per diluted share compared to net income of $49.8 million or $0.41 per diluted share last year.
Peabody Energy recently announced the lease of 402 million tons of ultra-low sulfur coal reserves adjacent to its North Antelope Rochelle Mine (NARM) in the Southern Powder River Basin of Wyoming. The company submitted the successful bid of $1.11 per mineable ton for control of the South Porcupine reserve area.
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