- J.P. Morgan analysts see some encouraging signs for coal (NYSEARCA:KOL), which would be good news for companies such as Peabody Energy (BTU -5.7%), Cloud Peak Energy (CLD -5%), Alliance Resource Partners (ARLP +0.9%) and Foresight Energy (FELP -1.2%).
- Coal equities have bounced off lows, the JPM crew says, which meshes with its belief that the greater financial challenges faced by oil and gas E&Ps should reduce natural gas supply and help coal prices later this year and into 2016.
- JPM has Overweight ratings on the two MLP coal miners ARLP and FELP, which it expects to benefit as the gas market tightens in 2016 and with the added attraction of yield in a yield-starved world; BTU and CLD enjoy stronger balance sheets, which should see the companies through what could still be a sloppy coal market in 2015.
- Alpha Natural Resources (ANR -6.9%) and Arch Coal (ACI -4.3%), however, acquired so much debt that their equity effectively has become primarily an “option" on fluctuations in the coal market, the analysts say.