Coal Stocks Show Potential for Future Gains

In a tough tape on Friday Coal related stocks performed above average and look to continue to run with profitable expectations growing. Massey Energy (MEE), Alpha Natural Resources (ANR) and Arch Coal (ACI) all have rising earnings expectations and are at 52 week highs. Just this past Monday, a broker, David Khani from FBR Capital Markets raised his price guidance for coal for next couple of years.

Massey Energy had a 1.48% increase on Friday when the S&P 500 fell 3%. This heavily covered producer of coal has had their current year earnings estimates increased for the current quarter from 0.50 to 0.76 in the past 90 days. The 13 analysts that cover the stock have also raised the yearly earnings estimates. The yearly earnings estimates have risen from 1.96 to 2.97 in the same 90 day period. Revenue is expected to increase 16% in the current quarter and 23.6% in the next quarter.

Alpha Natural Resources has some outstanding earnings expectations with earnings expected to grow 205% in the current quarter and 335% in the next quarter. With revenue growth of 20% in the current quarter, ANR has risen 370% over the past year but should continue to move higher with only a 12.08 forward P/E and very respectable earnings potential.

Arch Coal performed the best on Friday with a 3% move to the upside. This 10 Billion market cap St Louis based coal producer is expected to see its earnings increase year-over-year 146% when it announces its current quarter. This stock has the most reasonable trailing Price/Earnings ratio of the three stocks mentioned here at 46.22. With 23% revenue growth expected in the current and the next quarter, ACI should continue to rally.

It’s a tough market but a number of coal producers have rallied and should continue to rally despite the difficult environment due to good earnings and revenue growth.

Disclosure: None

Comments

[pachanguero]

nice job amigo

[scoots]

It is difficult to select the one or two best performing companies in the coal industry. Therefore, strongly consider the ETF KOL which has performed admirably. It has a very broad base of companies.

[drewster]

Nice call Steve. The rise in oil will cause coal's relative importance in the energy sector to rise further than it has been. Demand around the world is increasing exponentially, and the U.S. is a dominant player in the field. All bodes well for those companies you mentioned. Being aware of the underlying fundamentals driving global demand is soothing in an uncertain, choppy market.