Goldman Sachs Lowers Met Coal Price Outlook for 2015 to $126/MT

Goldman Sachs cut its 2015/16 met coal benchmark price projections to $126/$142 per MT (from $140/$147 per MT). With this in mind, analyst Neil Mehta sees downside for Peabody Energy (NYSE: BTU), Alpha Natural (NYSE: ANR), and Arch Coal (NYSE: ACI).

"Key drivers of the lower price forecasts include: (1) slower than expected steel production from China ytd; (2) potential for greater than expected supply from major producers including Australia, Mozambique and China; and (3) continued cost deflation shifting the global cost curve lower," said Mehta.

"With WLT (NYSE: WLT), ANR, ACI and BTU declining on average by 42% in the last month, many have asked if it is time to “call the bottom” on met levered coal stocks. We continue to recommend avoiding these names," he continued. "On our revised met price forecasts, we see 17% downside risk to 2015 consensus EBITDA for Sell-rated BTU, 48% downside risk to Sell-rated ANR and 17% downside risk to Neutral-rated ACI. We are within 5% of 2015 consensus for only SXC (CL-Buy), FELP (Neutral) and CNX (Buy). Our 3Q2014 EBITDA forecasts suggest downside risk to consensus for 5 of the 7 coal companies under our coverage. We lower price targets and estimates across our coverage to better reflect commodity, consensus and balance sheet risk."

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

Shares of Peabody Energy closed at $11.93 yesterday.

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