CHICAGO, April 3, 2013 /PRNewswire/ -- Today, Zacks Equity Research discusses the U.S. Coal, including Alliance Resource Partners LP (Nasdaq: ARLP), CONSOL Energy Inc. (NYSE: CNX), Natural Resource Partners L.P. (NYSE: NRP), Arch Coal, Inc. (NYSE: ACI) and Peabody Energy Corporation (NYSE: BTU).
A synopsis of today's Industry Outlook is presented below. The full article can be read at
Coal is burned as fuel or gasified to create a synthetic gas (syngas) that can then be used as feedstock for the production of chemicals, fertilizer and electric power. Coal is also used for producing heat through combustion.
Metallurgical coal or coking coal is used in steel production. Coal remains a dominant source of power generation worldwide, with around 40% of the total global generation capacity coal fired.
The U.S., Russia, Australia, China, India and South Africa have the largest coal reserves in the world. Coal is produced in 25 states in the U.S. though the bulk of current production takes place in just five states: Wyoming, West Virginia, Kentucky, Pennsylvania and Montana.
According to estimates by the Energy Information Administration (EIA), the country's current coal reserves will last for 168 years at current production rate. They will most likely last even longer with environmental issues coming in the way. However, if the fuel's environmental standing can be improved, there could potentially be new sources of end-market demand in the future, in the communications and transportation systems, computer networks and even space expeditions.
As per the World Coal Association, proven global coal reserves will last nearly 112 years at current production rates. On the other hand, proven oil and gas reserves are projected to last around 46 years and 54 years respectively at current production levels. Asia is the biggest coal market and presently accounts for 67% of the global coal consumption.
The Zacks Industry Rank, which relies on the same estimate revisions methodology that drives the Zacks Rank for stocks, currently puts the Coal industry at 247 out of 261 industries in our expanded industry classification. This puts the industry in the bottom third of all industries, which corresponds to a negative outlook.
The way to look at the complete list of 260+ industries is that the outlook for the top one-third of the list (Zacks Industry Rank of #85 and lower) is positive, while the outlook for the bottom one-third (Zacks Industry Rank #170 and higher) is negative.
Please note that the Zacks Rank for stocks, which is at the core of our Industry Outlook, has an impressive track record going back years, verified by outside auditors, to foretell stock prices, particularly over the short term (1 to 3 months).
None of the 17 companies in the Coal industry has a Zacks Rank #1 (Strong Buy) or Zacks Rank #2 (Buy), while 5 have either Zacks Rank #5 (Strong Sell) or Zacks Rank #4 (Sell). This reflects our bearish outlook on coal.
Earnings Review and Negative Outlook
In terms of Q4 earnings surprises, Alliance Resource Partners LP (Nasdaq: ARLP), CONSOL Energy Inc. (NYSE: CNX) and Natural Resource Partners L.P. (NYSE: NRP), among others, came out ahead of expectations.
In total, 57% of the coal companies in our coverage came out with positive earnings surprises in the fourth quarter, below the 62% average for the S&P 500 as a whole. The soft performance of the coal industry in 2012 is expected to linger in the first quarter of 2013 and demand for coal is likely to pick up in the subsequent quarters with the expected increase in natural gas prices. However, currently we expect first quarter performance of most of the coal stocks in our coverage universe to be lower than the year-ago quarter.
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