UBS cuts key coal names to Sell; cites oversupply, benchmark settlement


Yesterday's gains for coal stocks (KOL) on the back of Consol Energy's (CNX) upgraded coal outlook could be wiped out in early trading, as UBS downgrades Alpha Natural Resources (ANR), Walter Energy (WLT) and Arch Coal (ACI) to Sell from Neutral (I, II, III).

UBS sees lower met coal price forecasts due to oversupply issues and the lower than expected Q2 benchmark settlement; the firm expects stressed balance sheets and accelerated cash burn, which could result in a 2016 liquidity crisis.

The firm says pure-play WLT has the highest met coal leverage in its coverage, while ANR and ACI also have high EPS sensitivity to changes in the met coal price.

Price targets are lowered to $3 from $5 for ANR, $5 from $8 for WLT, and $3 from $5 for ACI.

ANR -3.7%, WLT -3.2%, ACI -2.7% premarket.

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Comments (22)
  • Coalfan
    , contributor
    Comments (115) | Send Message
     
    WTF. They just downgraded these same stocks two weeks ago....they must have a big client upset at the recent higher prices.
    9 Apr 2014, 08:07 AM Reply Like
  • 6151621
    , contributor
    Comments (1172) | Send Message
     
    This was my thought too. Trying to give prices a nudge lower. SEC still pretending there's a wall between analysts and IB.
    9 Apr 2014, 08:36 AM Reply Like
  • dezee
    , contributor
    Comments (3975) | Send Message
     
    Really, you think ratings agencies, brokers and mutual funds operate under one umbrella?
    9 Apr 2014, 09:14 AM Reply Like
  • Anon5311
    , contributor
    Comments (40) | Send Message
     
    Amazing how manipulation and abuse by banks isn't considered worthy of the SEC's time.
    9 Apr 2014, 08:19 AM Reply Like
  • WPSPIKER
    , contributor
    Comments (1149) | Send Message
     
    Really poor move, the upgrades were correct the cycle of steel making is continuing and increasing as China and India both work to increase construction. Then Australia and South America continue to upgrade and build out for denser urban sprawl. Then we have USA and Eu with tons of pent up demand waiting to break free. 2014 may be flat for spring but really bad winter left more demand than usual for many things that will be needed for summer repairs & construction overall. I held onto the suppliers (CLF) (WLT) for their long term contracts with Steel makers but sold my steel makers (X) (AKS) (NUE) and (AA) recently as typically they have poor late spring to summer performance. This year they appear to be holding up and increasing as they state more demand in coming qtrs. To meet this coming demand they need the raw materials MET COAL and IRON ORE.

     

    Mark
    9 Apr 2014, 08:35 AM Reply Like
  • Brogembank
    , contributor
    Comments (36) | Send Message
     
    It is like flipping a coin, these analysts and brokerages providing their Buys and Sells...

     

    Just yesterday, Coal was up due to a positive producer outlook and immediately the day after the fun is spoiled by a Sell...

     

    Look at the fundamentals: with Nat Gas prices on the rise, therm coal is once more becoming attractive; with ever increasing needs for electricity due to an increasing world population and higher living-standards globally -and hence greater electricity requirements- the long term outlook for coal remains positive.
    Cleaner coal-fired plant technologies should be added as well.

     

    Sure, there are somebanlance sheet related risks involved in the miners mentioned in the UBS sell report, however it is my opinion that most minres will be able to procrastinate real liquidity problems until the time that they will once again be (very) profitable. And when the tide turns, these stocks will soar...

     

    I remain long ACI and BTU, which I bought during last autumn and winter.

     

    Good luck ye all!
    9 Apr 2014, 08:59 AM Reply Like
  • Gene19
    , contributor
    Comments (29) | Send Message
     
    PRB coal price increasing, Nat Gas price stable around $4.50, Utility inventories low, realization Nat Gas price will increase due to need for drilling and infrastructure to meet demand, Leer mine lowest cost Met = buy, buy on pullback to support or hold ACI.
    9 Apr 2014, 09:08 AM Reply Like
  • mudderfubber
    , contributor
    Comments (35) | Send Message
     
    Everyone could see from the life rafts that the Titanic was sinking....UBS SHUT YOUR PIE HOLE! LOL
    9 Apr 2014, 09:46 AM Reply Like
  • tiger8896
    , contributor
    Comments (720) | Send Message
     
    I haven't read this analysts report but look at the names he's downgrading following the JRCC bankruptcy. One of ACI ANR or WLT is next if coal market pricing doesn't pick up.

     

    China declared war on pollution and deployed more renewable power generation last year than fossil fueled ones. I've been hearing about the turn around in coal for years now, sorry if I don't buy the case for the coal stocks.
    9 Apr 2014, 10:55 AM Reply Like
  • Yorick
    , contributor
    Comments (758) | Send Message
     
    The conspiracy theorist in me says that the Ukraine thing was one big attempt by the US to get Russia to do what they did. Thus, Western Europe is in a horrible situation for natgas from Russia every winter. The resulting sanctions pushed Putin just as we wanted into China's energy-desperate arms allow the US to step in and sell Europe gas and coal. Central banks get the price inflation they are desperate for, the US creates new markets for our oversupply...
    9 Apr 2014, 02:39 PM Reply Like
  • wigit5
    , contributor
    Comments (4365) | Send Message
     
    yorick,
    that sounds way to intelligent and forward thinking for the US government
    9 Apr 2014, 03:23 PM Reply Like
  • DevilDog85
    , contributor
    Comments (266) | Send Message
     
    China declared war on pollution. Lol. You are either being facetious or horribly naive. I suspect the latter.
    9 Apr 2014, 08:58 PM Reply Like
  • wigit5
    , contributor
    Comments (4365) | Send Message
     
    they quite literally have declared war on pollution devildog, they are just losing awfully in that war.
    9 Apr 2014, 09:25 PM Reply Like
  • genomegk
    , contributor
    Comments (844) | Send Message
     
    Dispatch from China's "war" on pollution <sarcasm font>

     

    http://reut.rs/PTqKBB
    9 Apr 2014, 11:33 PM Reply Like
  • wigit5
    , contributor
    Comments (4365) | Send Message
     
    Geno this isn't an effort for fighting pollution but rather self sustainability China has an interest in keeping coal prices down since the use it most they see major exporters cutting production and are concerned a bull run in coal prices could further slow their growth via rise in cost of electricity
    10 Apr 2014, 09:23 AM Reply Like
  • tiger8896
    , contributor
    Comments (720) | Send Message
     
    Interesting take on the fight on pollution being used to keep coal prices in check but I think the problem is real and there is widespread discontent among the citizenry about the pollution problem, a dissatisfaction that the party sees as politically destabilizing.

     

    Premier Li only "proclaimed war" on pollution on Mar. 1 but a broad policy initiative was proposed and this may be the start of an EPA like movement over there that has shaken the coal companies here in the US.

     

    The Chinese are the biggest consumers and producers of coal but the long term projections for coal growth are well below the growth rates for the overall economy so I wouldn't bet the Chinese are going to bail out the US coal companies like so many believe.
    10 Apr 2014, 01:53 PM Reply Like
  • wigit5
    , contributor
    Comments (4365) | Send Message
     
    @tiger, agreed china isn't the solution coal needs, coal needs massive infrastructure upgrading by developed countries (The US especially), and world wide growth in general...

     

    I'll reiterate that I don't think coal ever sees 2008 peaks in the next decade but somewhere in between there and today's prices is probable. If that trickles to share prices stocks like $ANR could see $20-$30 someday (maybe 3yrs, or 5yrs, or even 10yrs)... If I wasn't already invested in $ANR would I invest today no... but since my money is already in there I'm leaving it unless I see imminent signs of bankruptcy.
    10 Apr 2014, 03:52 PM Reply Like
  • genomegk
    , contributor
    Comments (844) | Send Message
     
    I consider ACI among my safest calls. Ironic since volatility and fear are the reason.

     

    I acquired the stock when 4.00 puts (paying .52!) were assigned and in short order sold 5.00 calls (.54) to "reduce" my cost to 2.94. Now I don't really care if the Apr 5.00 calls are assigned or if the I am "forced" to sell more calls at 4, 4.5 or 5. The premiums have made this idea more than worthwhile.

     

    Recent news (actually, far better in relative terms than last year) seems almost irrelevant.
    9 Apr 2014, 11:25 AM Reply Like
  • nemonemo
    , contributor
    Comments (337) | Send Message
     
    Funny how no one talks about Ng assets ANR has which is worth 2B. They already sold small fraction of those for $200M cash to Rice and stocks worth $300M.
    9 Apr 2014, 11:42 AM Reply Like
  • moseslarsen
    , contributor
    Comments (705) | Send Message
     
    Sold my ACI a few days ago and booked aprofit, but changed my stance from 'long' to 'trading' that name. This ridiculous analyst back and forth is upsetting, but I am going to try and trade it. Will get back in around 4.25. Still long BTU.

     

    Cheers, Moses
    9 Apr 2014, 11:45 AM Reply Like
  • BC3
    , contributor
    Comments (16) | Send Message
     
    UBS is not disseminating accurate analysis. They obviously have a substantial short position and have been getting destroyed. It's complete manipulation. 2 weeks ago they downgraded it and reduced their target price to 4.75 (still ridiculously low/inaccurate). ACI surpassed this "target" within two days of their "analysis". Now, two weeks later they drop it another 37%?!?! Can anyone at UBS explain how their findings/analysis has changed so much in a 2 week time period? Or was your initial attempt to manipulate the price downward just too ineffective?
    9 Apr 2014, 03:41 PM Reply Like
  • rocknrollstew
    , contributor
    Comments (118) | Send Message
     
    bravo bchleb3!! you hit it right on the head!..goldman too is a another weasel in that arena, catering to the big shorts who got hurt.. on another note:remember this is an election year..unemployed miners and their families are constituents. and they are screaming in these states, economies are weak in the mining states due to the epa and obams agenda...40% of are electric is coal..the grid cant function on 60%,ng .
    rolling blackouts will be on the way!
    9 Apr 2014, 04:41 PM Reply Like
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