Zacks.com releases the latest Analyst Interview. Today’s interview is with senior analyst Matthew Thurmond, who discusses Arch Coal (NYSE: ACI), Peabody Energy (NYSE: BTU) and CONSOL Energy (NYSE: CNX).
A synopsis of today’s Analyst Interview is presented below. The full article can be read at http://at.zacks.com/?id=2678.
Given the recent speculation in different coal gasification and coal-to-liquids technologies, is now a good time to buy into one of your three coal-miners?
The technologies you mentioned definitely offer upside, but I don’t know what the probability is that they will occur anytime soon. Right now they are potential opportunities, nothing more. I believe the mining group has a bit of speculation currently baked in. Some of it due to long-term bets on new coal technologies, some due to the tight natural gas supply/demand fundamentals. Either way, investors are hoping the strong prices of coal continue their upward trend.
Coal mining is a tough business, though, and it is a commodity business. Further, looking at earnings in this industry, relative to others, is tricky. First, the miners aren’t being taxed right now. Once they start earning more profits, however – and exhaust their net operating loss carry-forwards – these taxes will certainly come. Second, mining is very capital-intensive. This means that depreciation numbers on the income statement frequently understate actual maintenance capex. So when you see P/E ratios of around 20 in the coal group, it’s tough to rate them screaming Buys. Currently, I have Hold ratings on Arch Coal (NYSE: ACI), Peabody Energy (NYSE: BTU) and CONSOL Energy (NYSE: CNX). For the coal group as a whole, I would advise equal weighting with the market.
Read the full interview at http://at.zacks.com/?id=2647.
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