Alpha Natural Resources Inc. (NYSE:ANR) shares were upgraded to "Buy" from "Hold" by Brean Murray, Carret & Co. (BMC), which believes there is more upside to owning the shares.
The brokerage, which has a $15 target price, is of the view that the fundamentals and outlook of the company and the met coal market did not materially change over recent weeks. What did change is the stock price, BMC analyst Lucas Pipes wrote.
"Alpha's potential earnings range on various met coal prices is among the highest in its peer group, but based on our current sensitivity model, we believe that the potential upside is greater than the downside by a factor of roughly 2x," Pipes said. "This provides us with enough confidence to recommend the shares at current levels."
While we are cognizant that the macro-economic environment is challenging, Pipes believes that the supply disruptions in Australia due to the ongoing labor issues at BMA are currently a more meaningful driver for met coal prices.
"It is important to keep in mind that these strikes impact roughly 20 percent of the world's seaborne met coal supply, which in our opinion should keep prices elevated, with positive implications for U.S. producers," the analyst said.
Abingdon, Virginia-based Alpha Natural Resources is engaged in the production, processing, and sale of steam and metallurgical coal in the United States. The company has mining operations in Virginia, West Virginia, Pennsylvania, Kentucky, and Wyoming.
ANR shares, which have been trading in the 52-week range between $10.81 and $55.20, added 3.03 percent to trade at $11.23 on Monday. Providing quality reviews, articles and writings on crude oil, energy and gas online.
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