Walter Energy (WLT) Shares May Be Close to the Top - Barron's (ANR, BHP)
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Walter Energy (NYSE: WLT) shares have swelled up 340% in 2009 as the only pure play on metallurgical coal, but Barron's believes that it may be time to take a break from the stock.
An analyst from Avondale Partners says that "a lot of things need to continue to go right to justify the stock price." Met coal prices need to rise, China needs to import more met coal, and global recovery has to continue, the analyst comments.
Walter's enterprise value, which is the market cap plus net debt, is trading at 7x FY10 EBITDA estimates.
Walter's mines are also all in Alabama, and are all the deepest in the U.S., making for a more complicated procedure to extract coal.
Brean Murray analyst believes that a better play is Alpha Natural Resources (NYSE: ANR), which relies 55% on steel. The say that part of the attraction is that most investors have overlooked Alpha. They rate ANR at Buy and WLT at Hold.
Analysts see met-coal prices of $170 per metric ton set for 2010, compared to $129 for 2009. The prices are set in April by a contract between Nippon Steel and BHP Billiton (NYSE: BHP). This would be a record high for met coal, excluding 2008 when prices were set at $318 due to flooding in Australia, the world's largest source of met coal.
Other key factors are that production is down 11% in 2009, and China has become a net importer of met coal.
Walter insider's have sold $18.6 million in stock since October 26, 2009, signaling that they believe that any runup may have tapered off.
An analyst from Avondale Partners says that "a lot of things need to continue to go right to justify the stock price." Met coal prices need to rise, China needs to import more met coal, and global recovery has to continue, the analyst comments.
Walter's enterprise value, which is the market cap plus net debt, is trading at 7x FY10 EBITDA estimates.
Walter's mines are also all in Alabama, and are all the deepest in the U.S., making for a more complicated procedure to extract coal.
Brean Murray analyst believes that a better play is Alpha Natural Resources (NYSE: ANR), which relies 55% on steel. The say that part of the attraction is that most investors have overlooked Alpha. They rate ANR at Buy and WLT at Hold.
Analysts see met-coal prices of $170 per metric ton set for 2010, compared to $129 for 2009. The prices are set in April by a contract between Nippon Steel and BHP Billiton (NYSE: BHP). This would be a record high for met coal, excluding 2008 when prices were set at $318 due to flooding in Australia, the world's largest source of met coal.
Other key factors are that production is down 11% in 2009, and China has become a net importer of met coal.
Walter insider's have sold $18.6 million in stock since October 26, 2009, signaling that they believe that any runup may have tapered off.
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