Wall Street’s reaction to Walter Energy’s 2Q14 earnings

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Wall Street’s reaction

Walter Energy (WLT) lost 2.21% to close at $5.75 on July 31 when the earnings were announced. On the same day, Peabody Energy (BTU) fell by 1.76% to $15.09 and Alpha Natural Resources (ANR) fell by 1.74% to $3.39. Cloud Peak Energy (CLD) and Arch Coal (ACI) traded almost flat on that day.

Stock Price

The misses and misses

The company’s performance for the quarter disappointed Wall Street on all counts including earnings per share (or EPS) and sales. Wall Street analysts had estimated loss per share to be $1.715. The company reported loss per share of $2.33—35% off the expectation. The sales were marginally lower than expected at $378 million versus expectations of $383 million.

The analysts are expecting loss per share of $1.602 for 3Q14 with sales of $329 million.

Analyst recommendations

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NOMURA reaffirmed “neutral” rating on Walter Energy (WLT), but revised the price target to $5 from the previous $8. Various other brokerage houses and investments banks have lowered their target for Walter Energy in recent months on the back of weak metallurgical coal outlook. Brean Capital downgraded Walter Energy to “hold” from “buy,” recently. FBR Capital lowered the target price on the company to $7.5 from $8.5 while Citigroup reiterated a “neutral” rating on the company while lowering the price target to $6.2 from $8 earlier.

Overall, the picture for Walter Energy looks grim. In the next section in the series, we’ll see what lies ahead for the company.

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