NEW YORK (AP) — Shares of Peabody Energy moved higher Monday after a Morgan Stanley analyst upgraded the coal mining company, saying prices should recover.
Analyst Evan Kurtz said he thinks coal inventories will fall because of cuts in production, and prices will rebound somewhat. He raised his rating on Peabody shares to "Overweight" from "Equal-weight" and increased his price target to $30 per share from $20. The stock last traded at $30 in May 2012.
Shares of the St. Louis company rose 47 cents, or 2.5 percent, to $19.13 in afternoon trading.
Over the last few years the coal industry has been challenged by power companies that have switched to cheaper natural gas as their energy source. That forced many coal producers to close mines and cut back on production. But many mining companies say the price of natural gas is rising, creating new demand for coal. Kurtz said the coal market has gotten healthier because of reduced production and the chilly weather associated with last winter's polar vortex conditions. He expects the use of heating coal to increase in 2013.
"This is a major change from the heavy destocking environment dogging the market since 2012," he wrote. "We forecast year-end inventories falling to near historic lows, and a modest price recovery."
The analyst said he has a high rating on Peabody Energy Corp. shares because of the company's exposure to the Powder River Basin, a region in Montana and Wyoming that supplies around 40 percent of the coal in the
SMR Price at posting:
15.0¢ Sentiment: LT Buy Disclosure: Held
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