Nomura Cuts Walter Energy (WLT) Price Target in Half

October 12, 2012 7:53 AM EDT
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Price: $0.16 --0%

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Nomura Securities cut estimate and its price target on Neutral-rated Walter Energy (NYSE: WLT) from $70 to $35.

"We have lowered our 2013 benchmark coking coal view to $185/tone (was $220/tonne) and our 2014 forecast to $195/tonne (was $200/tonne)," analyst Curt Woodworth said. "We expect Walter to generate EPS losses in 4Q-12 and 1Q-13 given our expectation for contract prices to remain near $170/tonne before improving in 2Q-13. We have lowered our price target to $35 (from $70), based on a forward EV/EBITDA multiple of 8.7x 2013 estimates or 6.7x 2014E EV/EBITDA. WLT has significant EPS leverage to movements in coking coal price levels, with every $10/tonne move equating to $1.35 of annual EPS impact. We see incremental ASP headwinds for WLT at mine #4 as spreads continue to stay wide relative to benchmark quality coal such as mine #7.On the positive side, production levels are running very strong, but resulted in large inventory build in 3Q."

The firm cut 3Q12E EPS from $0.53 to $0.43; F12E EPS from $1.85 to $1.15; F13E EPS from $4.10 to $1.10.

For an analyst ratings summary and ratings history on Walter Energy click here. For more ratings news on Walter Energy click here.

Shares of Walter Energy closed at $37.68 yesterday.

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