Why Coal Stocks Got Crushed This Week

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It was a terrible week for coal investors as the stocks of Walter Energy, Arch Coal and Alpha Natural Resources were all crushed this past week.

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  • https://www.flickr.com/photos/22746515@N02/3281728778/in/photolist-5ZZHCE-e2jNte-ninwhq-azTgHQ-dTHU4X-7d9eqA-iP2gsi-evAEX6-7V1S5e-boM7vd-9U1kiq-HqXTu-6mT2X1-97iG8w-cNvEsb-i6GRir-docCtC-4pDGYM-4BqF-71xnUL-6mA9Um-amTdCm-6gVw7m-6gfRn3-8NWepT-bZkonW-56bvyB-bhYz6K-fdLKUk-9TXvWx-boPXQd-8ppDkD-6Tc4n-boo9nN-cmCuDY-VHqDz-4nCDV-6gVvNy-76tRev-9XbkJD-mCt5zB-crz2GE-aFa9HV-62MJ9t-9yXLjt-9z1Mpu-6P8CwD-brE6tA-4RmYrX-689HQo
  • https://www.flickr.com/photos/59937401@N07/5930176734/in/photolist-a32GWs-chEfau-62QSKq-9qUDuJ-bZwG3C-8ip6Yn-CrMvv-a2Y6J8-64gotj-gjJMZC-a2Yc86-5tzhjp-9Zkom5-8i2WXz-fBsQs-nQZguc-7CrchT-7BfThk-jYGnx-9kNTbs-aiphLC-9FPrx5-du8MtP-4Hrq53-BhdpN-8JkcMH-4ZAk72-9hwDnd-9qUFub-9VAoaM-5z3f3L-fxFR1Q-548Abb-9VAAZU-bZwfxo-9hwDJ5-dGo5nf-9K71ih-aeFyin-9qUCso-7WAEm8-ev2AR5-bjB39c-9kMAcY-bZwg4J-eA2zRg-bZwHv5-6bwpmk-9VDo4N-dAu1EJ
  • http://www.zacks.com/stock/news/139523/walter-energy-issues-notes-to-replenish-revolving-credit-facility and http://www.thestreet.com/story/12767731/1/why-alpha-natural-resources-anr-stock-is-slumping-this-afternoon.html?puc=TSMKTWATCH&cm_ven=TSMKTWATCH
  • http://www.zacks.com/stock/news/139523/walter-energy-issues-notes-to-replenish-revolving-credit-facility and http://www.thestreet.com/story/12767731/1/why-alpha-natural-resources-anr-stock-is-slumping-this-afternoon.html?puc=TSMKTWATCH&cm_ven=TSMKTWATCH
  • http://www.zacks.com/stock/news/139523/walter-energy-issues-notes-to-replenish-revolving-credit-facility and http://www.thestreet.com/story/12767731/1/why-alpha-natural-resources-anr-stock-is-slumping-this-afternoon.html?puc=TSMKTWATCH&cm_ven=TSMKTWATCH
  • https://www.flickr.com/photos/76657755@N04/7027588775/in/photolist-bH1eiH-f54gtt-9qRF8r-6QFDYU-4BfaUm-7987Vs-bH1gac-ght8m7-62QVb5-62LD8Z-6hSkjK-5KQyH9-chEaLb-5WEQZB-4sUYDb-aB7uKh-9PSLHY-fKKcRD-bxDiow-dSXXyh-9VADkr-9gYtwj-6c6Q6r-cEHZc1-bi1bhM-9qREU2-9KU6T1-8ip71R-9qUEUf-4e5gDL-8ip6YF-a32J27-8ddtDt-8PWifN-bZwdFC-9kNSHL-9kMUQb-4e1gT8-oh2EL-fEHuLF-5yL49b-5WsjQv-a32GWs-chEfau-62QSKq-9qUDuJ-bZwG3C-8ip6Yn-CrMvv-a2Y6J8
  • Why Coal Stocks Got Crushed This Week

    1. 1. Why Coal Stocks Got Crushed This Week Photo Credit: Flickr/Bert Kauffmann
    2. 2. Investors in coal stocks saw those investments go up in flames last week. In fact, of the four worst performing stocks in the energy sector this past week, three were coal stocks. Photo credit: Flickr/TaxRebate.org.uk
    3. 3. Walter Energy (NYSE: WLT) Shares of the leading, publicly traded “pure-play” metallurgical coal producer are down 13.1% over the past week.
    4. 4. Why Walter Energy’s stock dropped  Coal stocks were down after Morgan Stanley issued a warning that metallurgical coal prices may rebound more slowly than coal companies are anticipating.  Morgan Stanley also cut its forecast of metallurgical coal prices for next year as Chinese imports have been weak.  Meanwhile, it cut its price target of Walter Energy from $26 to $16.  In addition to that Walter Energy sold $320 million of senior secured notes to repay borrowings under its Revolving Credit Facility.  However, the new notes, which yield 9.5%, will increase the company’s interest burden by $49.4 million per year.
    5. 5. Alpha Natural Resources (NYSE: ANR) Shares of Alpha Natural Resources, which is also a leading producer of metallurgical coal, followed Walter Energy in falling this week as it was down 12.9%.
    6. 6. Why Alpha Natural Resources’ stock dropped  Alpha Natural Resources’ stocks was pulled down by the same Morgan Stanley warning that crushed Walter Energy this past week.  The big concern remains the forecast for the price of Metallurgical coal, which Morgan Stanley now sees at $133 per ton next year, down from its previous forecast of $160 per ton.  It also didn’t help that Morgan Stanley slashed its price target on Alpha Natural Resources from $5 down to $4.
    7. 7. Arch Coal(NYSE: ACI) Arch Coal’s stock was also hit hard last week as it fell 11.5%.
    8. 8. Why Arch Coal’s stock dropped  Tell me if you’ve heard this story before. Arch Coal’s stock fell last week after Morgan Stanley warned that Chinese demand might not pick up as fast and it cut its price forecast for metallurgical coal.  Morgan Stanley also added insult to injury taking a bite out of its price target for Arch Coal as it reduced it from $3 to $2.
    9. 9. Which coal stock has the best shot at bouncing back?  Coal stocks appear to be on a slow collision course for bankruptcy, with Walter Energy really teetering on the brink.  While all three are heavily shorted, Arch Coal is the stock that investors are least worried about as only 15% of its float is sold short compared to 29% of Alpha Natural Resources’ stock and 59% of Walter Energy’s stock.  However, while there’s the potential to make money on a short squeeze, there’s just as much chance an investor will get burned.Photo credit: Flickr/TaxCredits.net
    10. 10. A better option is to just invest in a top dividend stock than to mess with a rebound in coal.

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