Coal generates half of America's electricity, and for good reasons. It's easy to get at; around 40% of coal is merely scratched from the surface rather than dug for. It is plentiful; proven coal reserves will last four times as long as those of oil and natural gas. And it is close; America is to coal reserves what Saudi Arabia is to oil. For all of these reasons, electricity generated from burning coal has long cost just a nickel per kilowatt hour. Wind costs seven cents and solar 20 cents per kWh. Coal is even cheaper than nuclear power, once construction, decommissioning and waste-disposal costs are tallied (and before accounting for pollution costs). And so China and India are inaugurating a new coal plant nearly every week. The U.S. is building more coal plants than at any time in the past 20 years. Even Europe, with its three-year-old system of charging coal plant operators for pollutants that escape into the air, is expected to bring 50 new plants online over the next five years. Coal has seemed cheap, penalties and all. ... That will favor St. Louis-based Arch Coal (ACI), which sells the U.S. 12% of its coal and has vast reserves of the most attractive kind, which has little sulfur. ...Near and intermediate term, they are likely to remain high as coal powers today's new buildings and tomorrow's cars. My guess is that Arch's stock will head well higher over the next decade http://www.smartmoney.com/stock-screen/index.cfm?story=20080702-opportunity-in-coal-stocks&afl=yahoo Arch Coal "overweight," target price raised 07/09/08 - Lehman Brothers NEW YORK, July 9 - Analysts at Lehman Brothers reiterate their "overweight" rating on Arch Coal Inc (ACI). The target price has been raised from $75 to $100. http://www.newratings.com/en/main/company_headline.m?id=1773026
Man, you're buying some high multiple coal producers at a time when coal has risen mainly because alternatives have, and those alternatives may not be stable in terms of pricing. Not only that, but global economic growth is decelerating. Look at auto sales, housing, airlines, financials. The world isn't likely to demand higher energy to boost production for the foreseeable future. Seems like a dangerous play, but good luck.
Strong demand forecast to continue for US coal ACI's earnings are forecast to double this year and again next year, Arch Coal's PEG Ratio (5 yr expected) is just 0.59 ACI is undervalued and is likely to double within 12 months. Next Year EPS estimate for ACI $5.57
Thursday, July 10, 2008 Arch CEO Sees Positive Future for Coal "More and more of this coal's going to be exported out of the country," Eaves said. "It's low sulfur, it's high BTU (energy content) and I think it's a coal that's going to be desired not only in the U.S. but all over the world." Eaves described an environment of very strong coal demand globally and domestically. About six billion tons of coal was mined worldwide in 2007, he said. New coal-fired power plants will increase demand by more than one billion tons by 2012. More coal-producing countries are keeping their coal at home, Eaves said, and that's creating a strong export market for U.S. coal. http://www.statejournal.com/story.cfm?func=viewstory&storyid=41045
China Coal Industry Development Research Center predicts shortfall China needs more coal Guo Yuntao, director of the China Coal Industry Development Research Center, predicted coal demand for this year to hit 2.13 bln tons, the newspaper said. Guo also said coal supply capacity is predicted to reach 1.6 bln tons in 2010 and 2.0 bln tons in 2020, leaving shortfalls of 0.5 bln tons and 1.3 bln tons respectively. http://www.forbes.com/home/feeds/afx/2005/06/22/afx2105287.html