Short Interest in Peabody Energy Rises, in Rhino Resource Partners Falls (BTU, CLD, RNO)
The largest percentage swings in short interest in coal-related stocks between the June 28 and July 15 settlement dates happened to Cloud Peak Energy (NYSE: CLD), Peabody Energy (NYSE: BTU) and Rhino Resource Partners (NYSE: RNO).
The number of shares sold short in Alpha Natural Resources (NYSE: ANR), Arch Coal (NYSE: ACI), CONSOL Energy (NYSE: CNX), James River Coal (NASDAQ: JRCC), Walter Energy (NYSE: WLT) and Westmoreland Coal (NASDAQ: WLB) grew somewhat in the period.
However, short interest in Alliance Holdings (NASDAQ: AHGP) and Alliance Resource Partners (NASDAQ: ARLP) was essentially flat, compared to the previous period, and that in SunCoke Energy (NYSE: SXC) and Yanzhou Coal Mining (NYSE: YZC) fell.
Below we take a quick look at how Cloud Peak Energy, Peabody Energy and Rhino Resource Partners have fared and what analysts expect from them.
Cloud Peak Energy
This Wyoming-based coal mining company saw short interest retreat almost 17 percent in early July to more than 3.68 million shares. That was the lowest number of shares sold short so far this year, and represented about six percent of the float. Days to cover slipped to about four.
The company announced a decline in second-quarter shipments and lowered its full-year earnings guidance. Cloud Peak Energy has a market capitalization of about $1 billion and offers no dividend. The operating margin is greater than the industry average, and the return on equity is about 18 percent.
For the past three months, the consensus recommendation of analysts surveyed by Thomson/First Call has been to hold shares. But their mean price target, or where they expect the share price to go, suggests about 19 percent potential upside. That target is less than the 52-week high, though.
Shares are trading in the same neighborhood as a month ago, though the share price is more than 14 percent lower year-to-date. The stock has outperformed Peabody Energy and Walter Energy over the past six months, but it has underperformed the broader markets.
This St. Louis-based miner saw short interest rise more than 23 percent in the first weeks of July to about 19.08 million shares. That was about seven percent of the float and the largest number of shares sold short since last November. Days to cover increased from less than two to about three.
Cost cutting helped Peabody Energy beat earnings expectations for the most recent quarter. The company has a market cap of more than $4 billion and offers a dividend yield of about 2.0 percent. Note that its long-term earnings per share (EPS) forecast is less than one percent and its return on equity is in the red.
Yet 15 of the 25 analysts polled recommend buying shares, six of them rating the stock at Strong Buy. The analysts' mean price target suggests more than 29 percent potential upside relative to the current share price. That target is less than the 52-week high from last November.
The share price rose about eight percent in the period from near multiyear low. The share price is still down more than 36 percent since the beginning of the year. Peabody Energy has underperformed competitor CONSOL Energy and the broader markets over the past six months.
Rhino Resource Partners
This Lexington, Kentucky-based producer and processor of metallurgical coal saw short interest drop more than 26 percent in the period to less than 28,000 shares. That was the smallest number of shares sold short in a least a year, and less than one percent of the float and. Days to cover was about one.
Rhino Resource recently elected to keep its dividend steady. It offers a dividend yield of about 13.2 percent, and the company has a market cap of about $390,000. The operating margin is better than the industry average, but the return on equity is less than nine percent.
The analysts' consensus recommendation for the past three months has been to hold shares. Only one polled analyst had a price target, and it suggests more than 15 percent potential upside relative to the current share price. However, that target is less than the 52-week high from last fall.
Shares have traded mostly between $13 and $14 since February, and the share price is in the same neighborhood as at the beginning of the year. But the stock has outperformed Alpha Natural and James River over the past six months, though it too has underpeformed the broader markets.
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