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Morgan Stanley Maintains Bullish Stance on Walter Energy (WLT)

June 17, 2013 5:48 PM EDT Send to a Friend
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Price: $8.00 +0.13%

Rating Summary:
    4 Buy, 19 Hold, 4 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 18 | Down: 9 | New: 22
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(Updated - June 18, 2013 11:13 AM EDT)

Morgan Stanley today maintained an Overweight Walter Energy (NYSE: WLT) with a price target of $47.00. Analyst Evan Kurtz sees huge upside in the stock and thinks shares could climb even if the company announced an equity offering, although no offering in intended. Kurtz also believes the company's balance sheet is manageable.

"Despite the recent sell-off in shares on the back of the company's announcement that it has decided to not pursue a refinancing of its bank debt, we continue to see value in Walter shares ($47/share price target). Although the company is adamant about not raising equity, we see almost ~200% upside (to ~$35/share) even if the company dilutes shareholders by increasing share-count by one-third," said Kurtz.

"Covenants remain a concern, but we believe amendment is possible. Walter could trip financial covenants (senior secured leverage ratio and interest coverage ratio) related to its bank debt in 3Q13 as a result of depressed met coal prices. However, we continue to believe that the company will be able to relax these covenants in exchange for an amendment fee. We do not believe that a full-blown refinancing is necessary to achieve these changes," added the analyst.

Morgan Stanley sees hard coking coal prices declining again in Q3, but analysts view this as part of a "healing process" and think it will result in additional cuts to production.

For an analyst ratings summary and ratings history on Walter Energy (NYSE: WLT) click here. For more ratings news on Walter Energy click here.

Shares of Walter Energy closed at $12.13 yesterday.




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