Virginia-based premium coal producer,
Alpha Natural Resources Inc.
) will swap its place with
) to become an S&P Midcap 400 company from S&P 500 in
accordance to the S&P Dow Jones Indices LLC, effective October
1, 2012. Alternatively,
Kraft Foods Group Inc.
) will substitute Alpha Natural Resources to become an S&P 500
In recent times, Alpha Natural Resources' credit worthiness
plunged as Moody's affirmed its assigned Baa3 rating, which
indicates a negative outlook in terms of meeting financial
commitments by the company in the long run. The company was
unsuccessful in its cost management efforts as during the second
quarter it incurred $2.2 billion of expenses due to restructuring
and impairment purposes.
Although the company indulged in acquisitions to broaden its
exposure to the Central Appalachian region, we believe rising coal
to natural gas substitution in the U.S. will offset Alpha Natural
Resources' development prospects. This will be compounded by weak
metallurgical coal demand internationally.
Along with this, Alpha Natural Resources' asset retirement
obligations continued to increase steadily, which at the end of the
trailing six months ended June 2012 were $986.2 million, up from
$934.6 million at year-end 2011. This indicates that the company
has been involved in coal asset divestitures. With the U.S. coal
market expected to remain bleak in the near term, Alpha Natural
Resources' thermal coal business will take a major hit. This could
compel the company to cut back production levels or idle its
coal-fired plants thereby affecting top-line growth.
The company's financial position also looked shaky with cash in
hand declining in the first and second quarters of 2012. Alpha
Natural Resources' cash balance declined by a huge 132.3% to $252.2
million as of June 30, 2012. Moreover, the company failed to
effectively manage its debt level. Long-term debt as of June 30,
2012 almost remained flat year over year at $2.91
Meanwhile, Alpha Natural Resources' stock performance has been
on the downhill and quite volatile in the span of the last six
months. The company also posted drab earnings results in the last
three quarters with the loss widening every quarter. In the second
quarter 2012, loss per share stood at 30 cents versus earnings of
97 cents in the year-ago quarter.
The Zacks Consensus Estimates for the third quarter and full
year 2012 for Alpha Natural Resources currently stand at a loss of
40 cents per share and a loss of $1.39 per share, respectively. The
company's closest peer is Missouri-based,
Arch Coal Inc.
Alpha Natural Resources along with its subsidiaries engages in
the production and selling of steam and metallurgical coal in the
United States. The company was founded in 2002 and has a market
capitalization of $1.44 billion with 14,000 full time employees.
The company currently has a Zacks #3 Rank (Hold rating).
ARCH COAL INC (ACI): Free Stock Analysis Report
ALPHA NATRL RES (ANR): Free Stock Analysis
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