Walter Energy (WLT) Should Have Idled Canadian Operations Long Ago, Say Analyst

Wells Fargo maintained a Market Perform rating on Walter Energy (NYSE: WLT). Comments follow news the company idled its Canadian operations. In the view of analyst Sam Dubinsky, this is a step it should have taken long ago.

"This idling in our view should have been done a long time ago, but now looks forced as met coal pricing is at multi-­year lows (down 16% YTD in in 2014, following declines of 18%/27%/10% in 2013/2012/2011) and Walter's balance sheet is highly strained (we estimate net debt near $2.9B). At spot pricing of roughly $110/MT for low vol met coal (~$120 settlement pricing) Canadian operations were losing money; US operations till appear cost competitive." said Dubinsky.

"We remain on the sideline on shares until met coal pricing rebounds (which looks\ challenging given China's slowdown) or Walter deleverages its balance sheet via asset sales (which would also likely be predicated on improved macro)," he added.

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 $7.80 yesterday.

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