UPDATE: Morgan Stanley Upgrades Peabody Energy

In a note released Monday, Morgan Stanley analyst Evan Kurtz upgraded

from Equal-Weight to Overweight and raised the price target from $20 to $30. Commenting on the 2014 outlook for the industry, Kurtz wrote, "We believe coal burn will increase by 63 mt in 2014. While production should be able to keep pace, this is a major change from the heavy destocking environment dogging the market since 2012." Further, Kurtz forecasts that the 2014 yea-end inventories will fall to "near historic lows" and see a modest price recovery. Turning to met coal production, Kurtz noted that 15 mt of production cuts have been announced year-to-date. Kurtz believes these cuts may "stop the bleeding" on met coal prices and provide a bottom. Kurtz has picked Peabody as the best way to play this "modest recovery" and provided the following reasons.