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UPDATE: Morgan Stanley Reiterates on Walter Energy on Both Upside and Downside Risks

Dwight Einhorn

In a report published Friday, Morgan Stanley analyst Evan L. Kurtz reiterated an Overweight rating on Walter Energy (NYSE: WLT), but lowered the price target from $33.00 to $27.00.

In the report, Morgan Stanley noted, “While coking coal markets are oversupplied, prices have fallen well below marginal costs. As a result we think the commodity price risk is skewed to the upside from here. Walter operates first quartile coking coal assets that should allow the company to outlast higher cost competitors though the bottom of the cycle. Rebound from operational lows (for both volume and costs), with achievable targets. Attractive opportunity to expand beyond ~15 mt of capacity with Blue Creek. We see significant asymmetric upside to our price target, but meaningful downside risks remain.”

Walter Energy closed on Thursday at $7.27.

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