Coal Stocks Fell Last Week Even after Supreme Court Breather



Coal stocks

Coal stocks pared early gains to end the week of July 2 in the red. A key Supreme Court ruling on June 29 provided coal producers with a respite by ruling that the US Environmental Protection Agency (or EPA) failed to account for all the costs while formulating its Mercury and Air Toxic Standards (or MATS).

However, gloomy updates during the rest of the week more than offset these early gains. The VanEck Vectors Coal ETF (KOL) lost 2.6% during the week, while the broad-based SPDR S&P500 ETF (SPY) dropped 1.2% between June 29 and July 2.

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Peabody Energy

Peabody Energy (BTU) fell 18.3% during the week ending July 2, and the stock rose 9.6% on Monday. However, the company released an update on June 30 that painted a grim picture of its 2Q15 earnings, taking the stock down 29% in two trading sessions. The company said in the statement that June rainstorms and floods in the southern part of the Powder River Basin (or PRB) will have an impact of ~$40 million on the company’s 2Q15 revenues.

Moreover, the company expects Australian revenues to be lower by about $20 million due to the continued weakness in met coal prices. In addition, the company has reduced its scale of operations and headcount in some of its Australian mines. The company expects to incur about $20 million–$25 million toward related charges.

Following the leader

Cloud Peak Energy (CLD) fell 13.7% as Peabody Energy’s warning signaled a tough 2Q15 for PRB coal producers. Arch Coal (ACI) fell 11.7%, while Alpha Natural Resources (ANR) fell 11.3%. All these players have a significant presence in the PRB.

Only Alliance Resource Partners (ARLP) emerged as a winner among our coal coverage of nine stocks, ending the week by rising 1.9%.


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