Of the four analysts covering Westmoreland Coal (WLB), 100% or four analysts gave the company a “buy” rating. There weren’t any “sell” or “hold” ratings for the company as of July 4, 2016.
Since the release of its 1Q16 results, three analysts have revised up their estimates. Westmoreland’s consensus 12-month target price as of July 4, 2016, is $11.67. The target price indicates an ~17% return potential considering a $10.0 closing price on July 1, 2016.
Analysts’ expect Westmoreland Coal to report higher operating profit compared to the previous quarter. They see a nearly 20% increase in operating profit on a quarter-over-quarter basis. However, analysts anticipate that the company’s revenues will remain flat—compared to 1Q16.
Also, analysts expect that Westmoreland Coal will report an EPS (earning per share) of -$0.42—compared to an EPS of $1.67 in 1Q16. It’s important to note that Westmoreland Coal reported a one-time tax benefit of $47.93 million in 1Q16. Without this, its EPS could have been around -$0.94.
Among major coal (KOL) mining companies, analysts recommend Westmoreland Coal as a “buy” mainly because of its unique and stable business model, low production costs, diversified asset base, and secured cash flows from long-term coal supply agreements.
Moreover, the strategic location of its mines makes it a preferred choice for mine mouth power plants located near its mines. This also helps Westmoreland Coal to minimize the delivered cost of coal compared to its peers like Arch Coal (ACIIQ), Alpha Natural Resources (ANRZQ), Cloud Peak Energy (CLD), and Peabody Energy (BTUUQ).
In the next part of this series, we’ll look at analysts’ expectations and find out whether these recommendations are conservative or optimistic.