UPDATE: UBS Upgrades Alpha Natural Resources (ANR) to Neutral

(Updated - August 7, 2014 12:59 PM EDT)

UBS upgraded Alpha Natural Resources (NYSE: ANR) from Sell to Neutral with a price target of $4 (from $3). Analyst Kuni Chen noted good cost performance.

"We upgrade ANR shares to Neutral as better cost performance should drive a slower pace of cash burn. Balance sheet leverage remains high at 12x this year but the company’s strong liquidity position should allow it to sustain losses for over 4 years. Our model assumes a $131/mt met coal price in 2015 and Alpha needs a $140/mt met coal price (vs. recent $120 benchmark) to reach free cash flow breakeven," said Chen.

"We raise our 2015e EBITDA by 23% to reflect better cost performance. At this point, 2015 can still be considered a “black box” as management has not guided on committed & priced tons. Our $4 (was $3) price target is based on 13x (was 15x) raised 2015E EBITDA and 1.0x NAV. The multiple should return to a normalized 5-10x range over time. We assign a 90% weight to EV/EBITDA and 10% on NAV," he added.

For an analyst ratings summary and ratings history on Alpha Natural Resources click here. For more ratings news on Alpha Natural Resources click here.

Shares of Alpha Natural Resources closed at $3.70 yesterday.

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