Zacks.com releases the latest Zacks Industry Rank. Stocks featured in
this week’s analysis includes Alpha Natural
Resources (NYSE: ANR), Arch Coal (NYSE: ACI), Massey
Energy Company (NYSE: MEE), Natural Resource Partners (NYSE:
NRP) and Peabody Energy (NYSE: BTU). To see the Zacks
Industry Rank and the trend in earnings estimates revisions for more
than 200 industry groups, visit http://at.zacks.com/?id=3154.
Zacks Industry Rank Analysis is written by Charles Rotblut, CFA, Senior
Market Analyst for Zacks.com.
The sharp rise in oil, the rally in corn and wheat and the high cost of
metals (a nickel is now worth approximately 7.5 cents) have overshadowed
another commodity that also continues to appreciate - coal. Coal futures
are currently trading at $104, compared to $58 at the start of the year.
As one would assume, the impact of this appreciation, as one might
assume, was highly noticeable in the earnings from coal companies. Alpha
Natural Resources (NYSE: ANR) said last week that it "achieved the
highest quarterly price realization in its history due to rising
metallurgical coal exports and price levels".
ANR's first-quarter sales totaled $445.7 million, an increase of 17%
from a year prior. The amount of coal tonnage sold rose just 6.9%,
however, signifying the impact that higher prices had on revenue growth.
Earnings per share reached 39 cents, compared to 13 cents a year ago.
(Brokerage analysts had been expecting first-quarter profits of 17 cents
per share.)
ANR is not the only company to benefit. Arch Coal (NYSE: ACI), Massey
Energy Company (NYSE: MEE), Natural Resource Partners (NYSE:
NRP) and Peabody Energy (NYSE: BTU) all realized higher revenues
and profits last quarter.
There are several reasons why coal is rising. The overall rally in
commodity prices is providing upward momentum. Economic growth in China
and India has increased worldwide demand. Higher natural gas prices are
keeping coal an economically viable alternative for power. Even the
production of steel is playing a role.
Brokerage analysts have significantly raised full-year earnings
estimates on all five companies. The magnitude of the revisions suggests
a reassessment of the price coal will command throughout the remainder
of the year. As is the case with oil, brokerage analysts are realizing
that their previous projections were too conservative.
Forecasts for 2009 are also rising. This is important, because it
implies that valuations for all four stocks remain within reason despite
the sizable returns they have generated for investors this year.
ANR and MEE are Zacks #1 Rank ("strong buy") stocks. ACI, BTU and NRP
are Zacks #2 Rank ("buy") stocks. All five companies are classified in
Coal (http://at.zacks.com/?id=4571).
The interactive Zacks Industry
Rank List allows you to see all of the companies, and their Zacks
Rank, within more than 200 industries. See the list at
http://at.zacks.com/?id=3208.
About Zacks Industry Rank and the Zacks Rank
Zacks Industry Rank is calculated by averaging the Zacks
Rank for all covered companies within a given industry. The Zacks
Rank is assigned to approximately 4400 stocks and ranges from #1 (“Strong
Buy”) to #5 (“Strong
Sell”). Both the Zacks Industry Rank and the
Zacks Rank are quantitative indicators designed to cover periods of 1-3
months.
Since 1988, the Zacks Rank has proven that "Earnings estimate revisions
are the most powerful force impacting stock prices." Since inception in
1988, #1 Rank stocks have generated an average annual return of +32%.
During the 2000-2002 bear market, Zacks #1 Rank stocks gained +43.8%,
while the S&P 500 tumbled -37.6%. Also note that the Zacks Rank system
has just as many Strong Sell recommendations (Rank #5) as Strong Buy
recommendations (Rank #1). Since 1988, Zacks Rank #5 stocks have
underperformed the S&P 500 by 129% annually (+5 % vs. +12%). Thus, the
Zacks Rank system allows investors to truly manage portfolio trading
effectively.
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