UPDATE: Citigroup Raises PT on Walter Energy on 3Q Preview, Lowered Estimates

In a report published Thursday, Citigroup analyst Brian Yu reiterated a Buy rating on Walter Energy WLT, and raised the price target from $16.00 to $20.00. In the report, Citigroup noted, “After completing the $450 mln senior secured bond deal and repaying $250 mln in Term-Loan A debt through a Dutch Auction and updating our model for 3Q average coal and natural gas prices, we are lowering our estimate for 3Q operating EPS to -$1.01 from -$0.85 and vs. consensus of -$1.01 on EBITDA of $17 mln and revenue of $447 mln. In addition, our lower natural gas price forecasts of $3.75/$4.40 in ‘14/'15 and higher interest expense associated with the new 9.5% notes reduce our EPS estimates for 2013 to -$2.86 from -$2.45, 2014 to -$1.25 from -$0.85 and 2015 to -$0.50 from $0.00. We are maintaining our Buy (1) rating and raising our target price to $20 to reflect the potential for asset sales/JVs to accelerate cash flows and allow for a more rapid de-leveraging which could help to ease high balance sheet risk.” Walter Energy closed on Wednesday at $15.50.