Goldman Sachs Upgrades Coal Sector to Attractive (PCX) (BTU) (CNX)

June 20, 2011 7:25 AM EDT
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Goldman Sachs upgraded the Coal sector from Neutral to Attractive Monday, citing recent underperformance, upcoming group catalysts and attractive upside.

The firm sees an average of 35% upside for the group after recent underperformance due to concerns over China fiscal tightening and U.S./global growth worries.

Goldman also has an improved outlook for international and US bituminous thermal coal. They expect recent increases in thermal exports and lower production levels to persist which will lead to near-normal inventories by year's end.

Higher oil prices will support higher higher international coal prices and improved investor sentiment, Goldman notes.

It is also expected that stabilization and a modest re-acceleration of global GDP growth will also help the group, the firm said.

In the sector, the firm upgraded Patriot Coal Corporation (NYSE: PCX) from Neutral to Conviction Buy, Peabody Energy Corp. (NYSE: BTU) from Neutral to Buy and CONSOL Energy Inc. (NYSE: CNX) from Sell to Neutral. They downgraded Walter Energy, Inc. (NYSE: WLT) from Buy to Neutral. In addition, Alpha Natural Resources, Inc. (NYSE: ANR) rating was maintained at Neutral and Arch Coal Inc. (NYSE: ACI) was maintained a Sell.

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