Bank of America Reiterates Buy on CONSOL Energy as Top Pick in US Coal Market

In a report published Tuesday, Bank of America analyst Timna Tanners reiterated a Buy rating and $43.00 price target on CONSOL Energy CNX. In the report, Bank of America noted, “Our $43 PO uses a combination of NAV for gas and forward 7.5x 2014-15E EV/EBITDA for coal, in line with peers. We value CNX's gas business using our NAV at $6.1B based on CNX's latest reserve estimates and our long-term natural gas price of $5.50/MMBtu. Upside risks to our view on CONSOL Energy are: 1) potential further early monetization of its assets, 2) a higher dividend or share buybacks if the company shifts away from a strategy of growing organically, 3) a sharp recovery in natural gas or coal prices near term, possibly a result of severe weather patterns, and 4) any change to the political landscape that results in a more coal-friendly environmental approach. Downside risks are: (1) met and thermal coal price weakness. (2) excess met coal supply from slowing global demand and the ramp of new projects in Mongolia, Mozambique, and other countries. (3) gas venture operating risk. (4) rising mining costs related to environmental and regulatory changes. (5) substitution risk for thermal coal due to structural oversupply of U.S. natural gas. (6) shortage of coal miners in Appalachia. (7) met coal and coke substitution risk. (8) lack of new coal-burning power plants in the pipeline. (9) disruptions at the port of Baltimore. (10) slowing Chinese steel demand and (11) safety risk due to use of underground mining techniques.” CONSOL Energy closed on Monday at $35.02.