NEW YORK (AP) -- Shares of James River Coal Co. rose Monday after a Raymond James analyst upgraded the coal producer, saying he thinks the stock will trade higher this winter as natural gas prices rise.
A glut of natural gas in the U.S. and the resulting drop-off in price caused many utilities to switch to gas from coal this year. But higher gas prices could help increase demand for coal again.
THE SPARK: Analyst James Rollyson raised his rating on the shares to "Outperform" from "Market Perform" and set a $3 price target on them.
THE BIG PICTURE: The Richmond, Va., company and its competitors have been hurt by weaker demand for both coal used to generate power and coal used in steel manufacturing. James River Coal took a loss in the third quarter, saying coal sales fell about 9 percent and its expenses grew.
Coal shares fell steeply in the first half of the year, but many got a boost in the run-up to the presidential election on hopes that a Mitt Romney administration would loosen mine safety and pollution rules that make it more costly for them to operate. Shares have given back much of those gains since President Barack Obama was re-elected.
THE ANALYSIS: In a note to investors Monday, Rollyson said that James River should benefit from slower growth in the supply of natural gas, which may lift gas prices, thus increasing demand for coal. Winter weather may also drive up demand for coal from utilities.
SHARE ACTION: Most coal stocks slumped Monday afternoon, but James River Coal shares rose 23 cents, or 9 percent, to $2.72. The stock is down by nearly half since Election Day, and has dropped 64 percent this year.