Goldman Sachs Comments on This Week's Coal Rally (AC) (ANR) (CLD)

In a research note earlier, Goldman Sachs commented on this week's rally in coal stocks. Stocks mentioned in the report include Alpha Natural (NYSE: ANR), Arch Coal (NYSE: ACI), Cloud Peak Energy (NYSE: CLD), Consol Energy (NYSE: CNX), Peabody Energy (NYSE: BTU), Foresight Energy LP (NYSE: FELP), and SUNCOKE ENERGY, Inc. (NYSE: SXC). In the view of analyst Neil Mehta, gains are tied to profit taking on the heavily shorted group.

"After sharp ytd underperformance, the coal sector rallied 18% this week versus the S&P 500 down 2%. We note the sector has still lagged the broader market by 44% this year and 13% in the last month. We attribute this week’s strength to profit taking and technical factors more so than any fundamental changes in the underlying commodities," said Mehta.

"Spot PRB prices of $10.75/ST are well below our 2015 forecast of $13/ST, suggesting downside risk exists, given potential coal plant retirements and continued rail congestion. Spot CAPP prices of $51/ST are also well below our $60/ST 2015 forecast given higher-than-expected coal-to-gas switching levels," he added. "Overall we forecast four beats (ACI, BTU, CLD, and SXC) and three misses (ANR, CNX, and FELP) for 3Q2014. We do not view quarterly results as important as commentary on (1) asset sales, (2) contracting details, (3) resolution around rail issues and (4) production cuts."

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

Shares of SunCoke Energy closed at $21.04 yesterday.

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