On January 18, 2013, we upgraded our recommendation on
Walter Energy Inc.
) to Neutral from Underperform. The company currently has a
short-term Zacks Rank #3 (Hold).
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WALTER ENERGY (WLT): Free Stock Analysis
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Why the Upgrade?
There are several significant growth factors, which allowed us to
improve our recommendation on the stock.
As per the International Energy Agency's projection, the coal
industry will grow at an average rate of 2.6% till 2017 due to an
increase in coal-consumption, primarily in India, China and South
Korea due to increase in power generation.
In addition, entry to the prospective Latin American steel
markets will open up new possibilities for Walter Energy's
We view Walter Energy as an organization committed to maintain a
strong balance sheet with a flexible liquidity position. The
company's cash balance was $129.9 million as of Sep 30, 2012,
marginally up from the year-end 2011 level. During third-quarter
2012, the company had solid operating cash flows of $333 million,
which will enable it to execute its growth projects.
However, we are skeptical about several regulatory pressures,
which could undermine the company's aforementioned growth
Other Stocks to Consider
Apart from Walter Energy Inc., other coal companies
Natural Resource Partners L.P.
Hallador Energy Company
) are currently performing well and carry short-term Zacks Rank
#1 (Strong Buy) and Zacks Rank #2 (Buy), respectively.
Arch Coal Inc.
), a peer of the company, currently has a short-term Zacks Rank
Birmingham, Alabama-based Walter Energy produces and exports
metallurgical coal for the steel industry, primarily in the
United States. With market capitalization of $2.32 billion, the
company has 4,200 total employees.