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Why Most Analysts Still Recommend a ‘Hold’ for Cloud Peak Energy

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Analyst ratings

Of the six analysts covering Cloud Peak Energy (CLD), one (16.7%) gave the company a “buy” rating, three (50.0%) gave it a “hold” rating, and two (33.3%) gave it a “sell” rating.

Since the release of Cloud Peak Energy’s 2Q16 results, three of the six analysts covering the stock revised their targets up. There weren’t any downward revisions for the stock.

As of October 11, 2016, Cloud Peak’s consensus 12-month target price was $3.45. Currently, CLD stock is trading above analysts’ price targets and closed at $5.56 on October 11, 2016.

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Consensus estimates

Analysts expect Cloud Peak Energy (CLD) to report muted 3Q16 earnings compared to 3Q15. They also anticipate that the company will report adjusted EPS (earnings per share) of -$0.13 compared to $0.48 in 2Q16 and $0.25 in 3Q15. However, it’s important to remember that CLD’s higher 2Q16 EPS was mainly due to one-time non-cash accounting income of $37.3 million. That income was recognized due to the remeasurement of the company’s asset retirement obligations in 2Q16.

Among the major coal (KOL) mining companies, Cloud Peak Energy has received a “hold” recommendation from analysts. The recommendation was primarily due to the company’s strong balance sheet and low production costs compared to peers Arch Coal (ARCH), Alpha Natural Resources (ANRZQ), and Peabody Energy (BTUUQ).

Notable recommendations

Among the six firms covering Cloud Peak Energy stock, Macquarie is “neutral” on the stock, with a price target of $6 assigned on October 5, 2016. Stifel has maintained a “buy” rating on the stock with a price target of $5.50 assigned on September 28, 2016.

In the next part of this series, we’ll analyze analysts’ expectations and find out whether these recommendations are conservative or optimistic.

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