Coal Stocks Attractive, 24% Upside Near Term - Goldman
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Analysts at Goldman Sachs upgraded their view of US coal stocks to Attractive from Neutral. In a research report dated May 28th, they noted that there is 24 percent upside for stocks in this sector. They were especially bullish on SunCoke Energy (NYSE: SXC) Peabody Energy Corp (NYSE: BTU) and CONSOL Energy Inc. (NYSE: CNX) although they have a generally positive view of the entire sector.
"After falling to levels well below the average cash costs of production, we believe a combination of production cuts, higher gas prices and increased exports will drive both PRB and CAPP thermal coal prices to gradually improve in 2H2012, ultimately getting back to mid-cycle by the end of 1H2013," commented analysts.
Coals stocks have had a difficult month, with Market Vectors Coal ETF (NYSE: KOL), the ETF that tracks stocks in this sector, falling 19 percent. But with coal prices bottoming, Goldman analysts see a potential turnaround near term, although the longer term picture remains cloudy.
With its sector upgrade, Goldman also upgraded Peabody Energy Corp. (NYSE: BTU) from Neutral to Buy with a price target of $37.
"After falling to levels well below the average cash costs of production, we believe a combination of production cuts, higher gas prices and increased exports will drive both PRB and CAPP thermal coal prices to gradually improve in 2H2012, ultimately getting back to mid-cycle by the end of 1H2013," commented analysts.
Coals stocks have had a difficult month, with Market Vectors Coal ETF (NYSE: KOL), the ETF that tracks stocks in this sector, falling 19 percent. But with coal prices bottoming, Goldman analysts see a potential turnaround near term, although the longer term picture remains cloudy.
With its sector upgrade, Goldman also upgraded Peabody Energy Corp. (NYSE: BTU) from Neutral to Buy with a price target of $37.
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