Again, if these smaller companies can generate enough cash flow and augment enough credit facility use, they'll come out intact. I do not see where this company's management made a mistake that placed them on a death watch. The macro far overshadows anything occurring or not occurring at jrcc. jmo
A super opportunity
Two years ago, coal producer Peabody Energy was banking on seeing the industry in the midst of a huge supercycle. Instead, it faces intense regulatory scrutiny, plummeting prices, and slack demand for metallurgical coal. Weakness in the competing natural gas sector, where inventories remain well above five-year averages and prices at multiyear lows, has also been a big factor. Analysts are looking at coal demand in China to be soft, too, as production outpaces demand. According to the Energy Information Administration, coal consumption will drop this year to levels not seen since 1996.
Despite appearances to the contrary, Peabody is at an inflection point that will also see Arch Coal, Patriot Coal (NYSE: PCX ) , and Walter Energy (NYSE: WLT ) -- all of which also posted disappointing results recently -- rebound.
The supercycle is still intact, says Peabody, as rising electricity generation and steel demand in China and India, coupled with constrained global coal supplies, will allow Peabody, as the largest U.S. coal producer, to overcome what was weakness based on Australian weather. Shares are down more than 60% from their 52-week highs, but I'm betting it won't be running into any more buzzsaws and will recover from here, a point echoed by CAPS member MHenage: "Crazy cheap, stock sells for about 10 times forward earnings, this is half the P/E of the last 3 years. Company is the world's largest private-sector coal company, and is uniquely positioned to capture the global growth in coal use."
Thank goodness the debt to cash ratio is less an important matrix when your company has a commodity, a product, rather than a service to act as collateral. I suppose if jrcc had not made a cash purchase of their added reserves (including now metallurgical) this past summer which btw required no incurrence of additional debt from that company they'd have more cash on hand now. And?