Market Overview

Peabody Energy Bucks Short Interest Trend In Coal (BTU, CNX, RNO)

Rising short interest in CONSOL Energy (NYSE: CNX), Peabody Energy (NYSE: BTU) and Rhino Resource Partners (NYSE: RNO) bucked the trend among leading coal-related stocks between the August 30 and September 13 settlement dates.

Short sellers shied away from Alliance Resource Partners (NASDAQ: ARLP), Alliance Holdings (NASDAQ: AHGP), Alpha Natural Resources (NYSE: ANR), Arch Coal (NYSE: ACI), Cloud Peak Energy (NYSE: CLD), James River Coal (NASDAQ: JRCC), SunCoke Energy (NYSE: SXC) and Walter Energy (NYSE: WLT).

The number of their shares sold short in Westmoreland Coal (NASDAQ: WLB) and Yanzhou Coal Mining (NYSE: YZC) remained essentially flat, compared to the previous period.

Below we take a quick look at how CONSOL Energy, Peabody Energy and Rhino Resource Partners have fared and what analysts expect from them.

See also: Short Sellers Pile On Gold Fields And Other Gold Stocks

CONSOL Energy

This Pennsylvania-based coal and natural gas producer saw short interest swell about six percent in the first weeks of September to more than 12.86 million shares. That was more than five percent of the float. The days to cover increased to more than eight, its highest level in the past year.

CONSOL is expected to have swung to a profit in the current quarter. It has a market capitalization of more than $8 billion and offers a dividend yield of about 1.4 percent. The long-term earnings per share (EPS) growth forecast is more than 27 percent, but the return on equity is less than four percent.

Eight of the 26 analysts surveyed by Thomson/First Call rate shares at Strong Buy, and 15 more also recommend buying them. The analysts' mean price target indicates that they feel shares could rise more than 20 percent from the current share price. Shares have not traded in that neighborhood since late 2011.

Shares have risen less than six percent in the past month, despite a pullback in the past few days. CONSOL Energy has outperformed competitors Peabody Energy and Arch Coal over the past six months, but it has underperformed the broader markets in that time.

Peabody Energy

After three straight periods of decline, this St. Louis-based coal miner saw short interest rise about 14 percent to around 17.25 million shares. That was more than six percent of Peabody's float. The days to cover was more than two, as it has been since the middle of July.

Peabody reportedly sought $2.7 billion during the period to refinance debt. The company has a market cap of more than $4 billion and offers a dividend yield of about 1.9 percent. Note that its long-term EPS growth forecast is less than one percent and its return on equity is in the red.

Yet 15 of the 26 analysts polled recommend buying shares, six of them rating the stock at Strong Buy. The analysts' mean price target suggests more than 24 percent potential upside relative to the current share price. That target is less than the 52-week high from last November, though.

The share price has retreated more than four percent in the past week. It is down around 31 percent since the beginning of the year. As mentioned above, Peabody Energy underperformed competitor CONSOL Energy over the past six months, and it lags the broader markets as well.

Rhino Resource Partners

This Lexington, Kentucky-based producer and processor of metallurgical coal saw short interest jump more than 50 percent in the period to around 26,000 shares. That is still much less than the year-to-date peak of more than 133,000 shares back in February, and it represented less than one percent of the float.

Rhino Resource Partners announced an offering of more than a million common units in the period. It offers a dividend equivalent yield of about 14.4 percent, and the company has a market cap of about $330,000. The operating margin is better than the industry average, but the return on equity is less than five percent.

For the past three months, the consensus recommendation of the analysts polled has been to hold shares. Only one analyst had a price target, and it suggests more than 25 percent potential upside relative to the current share price. However, that target is less than the 52-week high from last fall.

Shares have faced resistance below $13 since early August, and the share price has pulled back about four percent in the past two weeks. However, the stock has outperformed Alpha Natural Resources over the past six months, though it too has underpeformed the broader markets.

See also: Rising Short Interest For Broadcom And Other Semiconductor Stocks

At the time of this writing, the author had no position in the mentioned equities.

Posted-In: Alliance Holdings Alliance Resource Partners alpha natural resources arch coal cloud peak energy consol energy james river coal Natural Resource Partners Peabody Energy Rhino Resource Partners SunCoke Energy walter energy Westmoreland Coal Yanzhou Coal MiningShort Ideas Commodities Markets Trading Ideas Best of Benzinga

 

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