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Factors Driving Major Coal Company Stocks So Far in 4Q16

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Important factors

Stocks of all major coal mining companies remained upbeat after the US election results on November 9, 2016. Also, the recent rally in natural gas prices on the backdrop of OPEC’s crude oil production curtailment agreement helped coal stocks continue their momentum so far in December 2016.

As coal competes with natural gas in electricity generation, high natural gas prices can have an indirect positive impact on coal stocks. The Henry Hub Benchmark natural gas spot prices rose nearly 25% since the beginning of 3Q16 through December 12, 2016. However, these prices still persist at multiyear lows.

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Major coal stocks

Of all the major coal mining stocks, Peabody Energy (BTUUQ) has gained the most so far in 4Q16. Company-specific reasons led BTUUQ stock to rise nearly 488% since the beginning of the current quarter. On October 11, 2016, Peabody Energy obtained DIP (debtor-in-possession) lender approval to amend certain milestones as a part of its Chapter 11 restructuring process. However, the company expects to complete the reorganization process within 12 months as originally contemplated for Chapter 11 cases.

Strong 3Q16 operational performance and broad-based market cues helped Westmoreland Coal (WLB) and Cloud Peak Energy (CLD) stocks to gain nearly 95% and 13%, respectively, from September 30–December 14, 2016. Alliance Resource Partners (ARLP) gained nearly 3% during the same period.

Series overview

In this series, we’ll perform a comparative analysis of major coal (KOL) mining companies’ 3Q16 earnings. Also, we’ll take a close look at their management’s guidance and analyst expectations for 4Q16. We’ll conclude the series with a brief look at current valuations of incumbent coal miners and an outlook for the coal industry.

In the next part of this series, we’ll compare the coal (KOL) shipments’ growth rate of major coal mining companies in 3Q16.

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