Coal is ripping up the tape for commodity investors lately, the way those longwall shearers built by Joy Global and Bucyrus can rip into a coal seam.
Back in November, I encouraged Fools to get their heads in the cloud by considering the Cloud Peak Energy
Cloud Peak this week reported full-year 2009 earnings from continuing operations of $2.97 per share, which yields a trailing price-to-earnings ratio of just 5.5. Absorbing a minor production decline with ease, the company enjoyed record EBITDA of $396 million.
True to its stated strategy of targeting disciplined cost controls and heavy reliance upon fixed price forward sales contracts, this stock is not seeing the rip-roaring growth of expanding Appalachian miners like Massey Energy
To its credit, Cloud Peak is not exactly being left out in the cold from the piping-hot Asian demand for thermal coal. The company shipped some 1.6 million tons to Asia through Vancouver during 2009, and intends to pursue additional export opportunities.
Reading the pulse of the PRB
Fools familiar with my coverage of the domestic coal industry will be well aware that fuel switching by the nation's utilities -- where it became more economical to burn natural gas than coal -- when combined with an economic slowdown and unfavorable weather, played a major role in growing coal stockpiles to an unprecedented peak above 200 million tons during 2009. Adding nuance to the discussion, Cloud Peak points out that PRB coals were less affected by this phenomenon than the bituminous coals of the eastern United States. In addition, much of the new electrical generation capacity set to hit the grid this year is intended to burn PRB coal.
Now that stockpiles have diminished to 175 million tons in the beginning stages of market stabilization, investors can expect the PRB to move swiftly toward normalized sales volumes. Accordingly, Arch Coal
Although I continue to favor Peabody Energy