For Immediate Release
Chicago, IL – December 5, 2012 – Today, Zacks Equity Research discusses the U.S. Coal, including Alliance Holdings GP, L.P. (AHGP), Arch Coal, Inc. (ACI), Peabody Energy Corporation (BTU), Alpha Natural Resources Inc. (ANR), Natural Resource Partners L.P. (NRP).
A synopsis of today’s Industry Outlook is presented below. The full article can be read at
Apart from natural gas, the coal industry has been losing a major share of its electric generation demand to renewable sources of energy like wind, solar and hydro power.
Production of power from renewable sources has also been supported by various U.S. states. At present there is no national consensus regarding the percentage of energy to be generated from renewable sources by the power generators.
Undoubtedly, state legislators are giving more emphasis to produce power from renewables. At present, 30 U.S. states and the District of Columbia have enforceable renewable portfolio standards or other renewable generation policies. These policies were designed to spread awareness and encourage the power generators to produce more from renewable sources.
The share of renewable fuels (including conventional hydro) in energy generation is projected to grow from 10% in 2010 to 16% in 2035, as per the EIA’s long-term outlook.
Increasing Debt Levels: One of the major concerns for the coal companies is the mounting debt levels. The need for expansion, locating new fields and upgrading the existing system are pushing the coal companies to take more credit from the market by issuing bonds and securities.
However, in some cases, the extra funds which are put into operation are not generating the desired results. Some of the coal companies are on the brink of failure to service its debts. Patriot Coal, for one, has filed for bankruptcy protection.
Spiraling debt and a failure to service these debts on time lower the credit worthiness and credit rating of a company. In such a scenario it gets increasingly difficult for the company to collect funds from the market. And the conditions, if funds are at all granted, get much stricter and less favorable.
Earnings Review and Zacks Rank
The Zacks Industry Rank, which relies on the same estimate revisions methodology that drives the Zacks Rank for stocks, currently puts the Coal industry at 224 out of 260 industries in our expanded industry classification. This puts the industry in the bottom third of all industries, which corresponds to a negative outlook for the industry. None of the 18 companies in the Coal industry has Zacks Rank #1 (Strong Buy) or Zacks Rank #2 (Buy), while 6 have either Zacks Rank #5 (Strong Sell) or Zacks Rank #4 (Sell).
The earnings results of Alliance Holdings GP, L.P. (AHGP), Arch Coal, Inc. (ACI), Peabody Energy Corporation (BTU), Alpha Natural Resources Inc. (ANR), Natural Resource Partners L.P. (NRP), among others, surpassed the Zacks Consensus Estimates. The highest positive surprise of 35 cents came from Arch Coal with the lowest surprise of 5 cents coming from Rhino Resources.
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