Merrill Reiterates Buy on U.S. Coal Producers

Analyst Daniel Roling says upside earnings will stem from contracts that locked in higher coal prices prior to the economic slowdown

Merrill Lynch reiterated its near term and long term buy for Massey Energy (MEE ) and other coal producers Arch Coal (ACI ) and Consol Energy (CNX ), which were all trading higher on Wednesday, Oct. 10.

Analyst Daniel Roling says the outlook for significant 2002 earnings momentum for U.S. coal producers he covers remains intact. He added that the vast majority of 2002, and some of 2003, sales contracts were locked in at substantially higher prices prior to the current economic slowdown. Moreover, coal prices continue to be strong even in the face of lower natural gas prices, validating the thesis that coal and gas prices have very low correlation, Roling notes.

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