US Coal Stocks Rebound On Strong 2Q Results, Analyst Views

Last Update: 7/25/2008 1:42:59 PM

DOW JONES NEWSWIRES

Coal producers are having a good day in the market following Arch Coal Inc.’s
(ACI) report Friday that second-quarter net income more than tripled, while
smaller firm International Coal Group Inc. (ICO) received positive comments about
its results.

As oil prices rise this year, some have turned to coal as a more attractive
fossil fuel, inflating prices and margins for coal companies, leading
International Coal and Arch to beat expectations this week.

International Coal was recently up 14% to $9.93, while Arch gained 9% to $55.60.
Fellow coal firm Massey Energy Co. (MEE) jumped 12% to $70.27 and Foundation Coal
Holdings Inc. (FCL) rose 5% to $61.25.

The stocks have been volatile of late, as coal and oil prices have largely been
moving in tandem. Oil futures appear to have topped in the near-term, and with
that coal stocks have been pressured after years of outperformance. For example,
Arch’s stock had fallen by one-third the past month before Friday’s gains.
Despite the recent weakness, Arch is still up 83% the past year.

Arch, while posting stronger-than-expected results for the latest quarter,
boosted its 2008 earnings forecast. International Coal, whose results also beat
forecasts when released late Wednesday, saw the investment rating on its stock
raised to buy from neutral by Davenport & Co. Beyond the results, the firm Friday
noted International Coal’s “attractive portfolio of new projects.”

Foundation Coal rating from Credit Suisse remains at neutral despite the surprise
loss the company reported Thursday. Weather problems slowed Foundation’s
production and shipping, and Credit Suisse remains confident that price hikes
will help Foundation recover.

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