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Coal Stocks: End-Of-Summer Short Interest Moves (RNO, WLT, YZC)

September 13, 2013 11:55 am
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Moves in short interest in leading coal-related stocks were mixed between the August 15 and August 30 settlement dates.

Rhino Resource Partners (NYSE: RNO), Walter Energy (NYSE: WLT) and Yanzhou Coal Mining (NYSE: YZC) saw significant short interest swings. Below we take a quick look at how they have fared and what analysts expect from them.

Short interest in Alliance Resource Partners (NASDAQ: ARLP), Cloud Peak Energy (NYSE: CLD), James River Coal (NASDAQ: JRCC), SunCoke Energy (NYSE: SXC) and Westmoreland Coal (NASDAQ: WLB) grew somewhat in the period.

The number of their shares sold short in CONSOL Energy (NYSE: CNX) was essentially flat. Short sellers shied away from Alliance Holdings (NASDAQ: AHGP), Alpha Natural Resources (NYSE: ANR), Arch Coal (NYSE: ACI) and Peabody Energy (NYSE: BTU).

See also: Short Sellers Return To Delta, Flee U.S. Airways

Rhino Resource Partners

This Lexington, Kentucky-based producer and processor of metallurgical coal saw short interest rise more than 21 percent in the period to more than 17,000 shares. That ended a four-period streak of falling short interest. The number of shares sold short represented less than one percent of the float.

Rhino Resource Partners announced management changes during the period. It offers a dividend yield of about 14 percent, and the company has a market capitalization of about $350,000. 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 analysts polled by Thomson/First Call has been to hold shares. Only one analyst had a price target, and it suggests more than 22 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 is about nine percent lower than at the beginning of the year. However, the stock has outperformed Alpha Natural and James River over the past six months, though it too has underpeformed the broader markets.

Walter Energy

This Birmingham, Alabama-based producer and exporter of metallurgical coal for the steel industry saw short interest retreat about 17 percent in the period to more than 21.91 million shares. That was more than 35 percent of the float. The days to cover increased to about three.

Walter Energy narrowed its net loss more than expected in the most recent quarter. It has a market cap of around $870 million and offers a dividend yield of about 0.3 percent. The long-term EPS growth forecast is more than 24 percent, but the return on equity and operating margin are in the red.

Though the consensus recommendation on Walter Energy is to hold shares, nine of the 23 surveyed analysts recommend buying. The analysts’ mean price target indicates that they feel shares could rise about 23 percent from the current share price. That target is much less than the 52-week high, though.

Shares have risen more than 14 percent in the past month, despite a pullback in the past few days. Walter Energy has underperformed the likes of CONSOL Energy and Westmoreland Coal, as well as the broader markets, over the past six months.

Yanzhou Coal Mining

Short interest in this Chinese company increased more than 15 percent in the final weeks of August to more than 1.42 million shares. That ended three consecutive periods in which the number of shares sold short has declined. The days to cover rose from less than three to more than five by the end of the month.

This miner of coking coal and thermal coal has grown its top line each year since 2009. Yanzhou Coal has a market cap of more than $4 billion and a dividend yield near 5.4 percent. The long-term EPS growth forecast is only about five percent, but the return on equity is more than 18 percent.

Only one analyst was surveyed, and that analyst recommends selling shares. Not surprisingly, the current share price is much higher than that one analyst’s price target. Even the multiyear low hit in early August was higher than the target.

The share price is up more than 16 percent from a month ago, and here too it has pulled back recently. Yet Yanzhou Coal has underperformed competitors Alliance Holdings and SunCoke Energy, as well as the broader markets, over the past six months.

See also: Four Mining and Metals Stocks With Upside Potential

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

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