CONSOL Energy, Inc.'s (CNX) first quarter earnings per share were below our expectation as low gas prices and the increase in the cost per ton of coal production impacted the performance of the company. The weak demand and declining prices per ton has prompted the company to idle two coal mines.
CONSOL has decided to make more capital investment in the oil prone areas and shy away from gas investment due to depressed gas prices. However, dependence on a small group of consumers for bulk sales, rising cost for producing coal along with stricter legislations and rigid penalties on underground mining remain concerns for underground miners like CONSOL Energy.
We are maintaining our Underperform rating on the stock. Our target price of $30.00 is based on a 2012 P/E multiple of 14.8.
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