Zacks Industry Outlook Highlights: AllianceResource Partners, CONSOL Energy,
Natural Resource Partners, Arch Coal and Peabody Energy
CHICAGO, April 3, 2013
CHICAGO, April 3, 2013 /PRNewswire/ -- Today, Zacks Equity Research discusses
the U.S. Coal, including Alliance Resource Partners LP (Nasdaq:ARLP), CONSOL
Energy Inc. (NYSE:CNX), Natural Resource Partners L.P. (NYSE:NRP), Arch Coal,
Inc. (NYSE:ACI) and Peabody Energy Corporation (NYSE:BTU).
A synopsis of today's Industry Outlook is presented below. The full article
can be read at
Coal is burned as fuel or gasified to create a synthetic gas (syngas) that can
then be used as feedstock for the production of chemicals, fertilizer and
electric power. Coal is also used for producing heat through combustion.
Metallurgical coal or coking coal is used in steel production. Coal remains a
dominant source of power generation worldwide, with around 40% of the total
global generation capacity coal fired.
The U.S., Russia, Australia, China, India and South Africa have the largest
coal reserves in the world. Coal is produced in 25 states in the U.S. though
the bulk of current production takes place in just five states: Wyoming, West
Virginia, Kentucky, Pennsylvania and Montana.
According to estimates by the Energy Information Administration (EIA), the
country's current coal reserves will last for 168 years at current production
rate. They will most likely last even longer with environmental issues coming
in the way. However, if the fuel's environmental standing can be improved,
there could potentially be new sources of end-market demand in the future, in
the communications and transportation systems, computer networks and even
As per the World Coal Association, proven global coal reserves will last
nearly 112 years at current production rates. On the other hand, proven oil
and gas reserves are projected to last around 46 years and 54 years
respectively at current production levels. Asia is the biggest coal market and
presently accounts for 67% of the global coal consumption.
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 247 out of 261 industries in our expanded industry classification.
This puts the industry in the bottom third of all industries, which
corresponds to a negative outlook.
The way to look at the complete list of 260+ industries is that the outlook
for the top one-third of the list (Zacks Industry Rank of #85 and lower) is
positive, while the outlook for the bottom one-third (Zacks Industry Rank #170
and higher) is negative.
Please note that the Zacks Rank for stocks, which is at the core of our
Industry Outlook, has an impressive track record going back years, verified by
outside auditors, to foretell stock prices, particularly over the short term
(1 to 3 months).
None of the 17 companies in the Coal industry has a Zacks Rank #1 (Strong Buy)
or Zacks Rank #2 (Buy), while 5 have either Zacks Rank #5 (Strong Sell) or
Zacks Rank #4 (Sell). This reflects our bearish outlook on coal.
Earnings Review and Negative Outlook
In terms of Q4 earnings surprises, Alliance Resource Partners LP
(Nasdaq:ARLP), CONSOL Energy Inc. (NYSE:CNX) and Natural Resource Partners
L.P. (NYSE:NRP), among others, came out ahead of expectations.
Of those that missed, some of the notable names are Arch Coal, Inc. (NYSE:ACI)
and Peabody Energy Corporation (NYSE:BTU).
In total, 57% of the coal companies in our coverage came out with positive
earnings surprises in the fourth quarter, below the 62% average for the S&P
500 as a whole. The soft performance of the coal industry in 2012 is expected
to linger in the first quarter of 2013 and demand for coal is likely to pick
up in the subsequent quarters with the expected increase in natural gas
prices. However, currently we expect first quarter performance of most of the
coal stocks in our coverage universe to be lower than the year-ago quarter.
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