On Aug 18, we issued an updated research report on coal mining
Peabody Energy Inc.
). Peabody's presence in two of the fastest growing U.S. coal
markets and its exposure in Australia could help it to overcome the
current slackness in the coal market. However, the U.S.
Environmental Protection Agency's (EPA) proposal to curb pollution
could negatively affect coal demand and consequently impact the
future prospects of the miners.
Peabody Energy, a Zacks Rank #3 (Hold) stock, reported a loss of 28
cents in the second-quarter 2014, marginally wider than the Zacks
Consensus Estimate of a loss of 27 cents. However, overall
improvement in sales volumes and higher realized prices of U.S.
tons sold helped the company to beat the top-line estimate.
Peabody expects a revival in thermal coal demand globally, led by
continuous urbanization and industrialization in the Asian
countries, primarily in China and India. A World Steel Association
projection indicates an improvement in met coal sales driven by
higher steel consumption. Harsh winter conditions in the U.S. had
led to higher usage of coal-fired units to meet increasing demand
for electricity, thereby lowering stockpiles. This could also
create fresh demand for thermal coal.
However, these positives are negated by the ongoing congestion in
railroads services in the U.S. Peabody lowered its 2014 U.S. coal
sales target to 185-190 million tons from 185-195 million tons to
accommodate the loss in sales due to railroad congestion.
Increasing pressure from natural gas and alternate energy sources
continue to weigh on the coal stocks as well.
In June this year, the EPA proposed a Clean Power Plan, the primary
objective of which is to cut down emissions from existing
coal-fired power plants by 30% over the 2005 to 2030 time frame. If
the proposal is accepted, it could hurt Peabody s domestic thermal
coal sales as coal-fired power units are a major contributor of
greenhouse gas generation.
Coal still grabs a major share in the global energy mix, despite
increasing pressure from other fuel sources. Peabody's strategic
presence in the U.S. and Australia could help it to benefit from
any revival in the coal markets.
However, Peabody will have to ward off competition from other coal
producers like Alliance Resource Partners (
), Alpha Natural Resources, Inc. (
) and Arch Coal, Inc. (
Want the latest recommendations from Zacks Investment Research?
Today, you can download 7 Best Stocks for the Next 30 Days.
Click to get this free report
ARCH COAL INC (ACI): Free Stock Analysis Report
PEABODY ENERGY (BTU): Free Stock Analysis
ALPHA NATRL RES (ANR): Free Stock Analysis
ALLIANCE RES (ARLP): Free Stock Analysis Report
To read this article on Zacks.com click here.