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Yesterday's gains for coal stocks (NYSEARCA:KOL) on the back of Consol Energy's (NYSE:CNX) upgraded coal outlook could be wiped out in early trading, as UBS downgrades Alpha Natural Resources (ANR), Walter Energy (NYSE:WLT) and Arch Coal (NYSE: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.