Dahlman Rose Decreases Price Target on Walter Energy (WLT)

Dahlman Rose & Co. is out with a research report this afternoon, where it reiterates its Buy rating on Walter Energy

; it decreased its price target on the name from $118.00 to $110.00. The Dahlman analysts noted that Walter maintained its full-year sales outlook but introduced guidance pointing to a sequential margin drop in 4Q. Operating margin per ton is guided at $84-87/ton, down from $108 in 3Q due to a combination of $12/ton of lower realized pricing and higher costs stemming from the delay in the startup of the second longwall at Mine No. 7 East. The analysts continue to believe Walter's production growth profile and international market exposure make the company very attractive amid growing worldwide metallurgical coal demand. As for valuation, the analysts remarked, “We are lowing our estimates in 4Q to reflect new guidance expectations as well as for 2011 and 2012 due to our more conservative cash operating cost assumptions.”