- Cloud Peak Energy (CLD +2%) is upgraded to Market Perform from Underperform with a $4 price target at FBR, which says the stock's valuation is fair compared to its outlook for the timing and extent of a potential recovery.
- The firm says CLD management has done a fine job repositioning the company, from restructuring its export obligations to addressing the bonding questions to issuing equity and redeeming debt; however, CLD's exposure to volatile seaborne pricing remains a key uncertainty.
- FBR also thinks Peabody Energy’s (BTUUQ) emergence from bankruptcy is bullish for the broader coal sector (NYSEARCA:KOL), as the move could attract more liquidity and long-term capital to the industry, which remains in gradual cyclical recovery even as long-term pressures remain.
- Arch Coal (ARCH -2.1%) is FBR's top stock in the group, given its exposure to both met and thermal prices and its low-cost production profile.