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Why Are Analysts Rating Westmoreland Coal a ‘Buy’?

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Analysts’ recommendations

Of the three analysts covering Westmoreland Coal (WLB), 100% (three analysts) gave the company a “buy” recommendation. There were no “sell” or “hold” recommendations for the company as of October 6, 2016.

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Price target

Since the release of WLB’s 2Q16 results, one out of three analysts covering the stock has upwardly revised the company’s price target. Westmoreland’s consensus 12-month target price as on October 6, 2016, is $9.50. This target price indicates about 7% return potential, given its $8.89 closing price on October 6, 2016.

Consensus estimates

Analysts expect Westmoreland Coal (WLB) to report higher operating profit compared to the previous quarter. Analysts also expect that Westmoreland Coal’s adjusted EPS (earning per share) will be around $0.34 for 3Q16, as compared to adjusted EPS of -$1.63 in 2Q16 and adjusted EPS of about -$2.0 in 3Q15.

Among major coal (KOL) mining companies, analysts recommend buying Westmoreland Coal Company Primarily because of its unique 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 minimize delivered cost of coal compared to its peers like Arch Coal, Alpha Natural Resources (ANRZQ), Cloud Peak Energy (CLD), and Peabody Energy (BTUUQ).

Now let’s analyze analysts’ expectations and find out whether these recommendations are conservative or optimistic.

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