Patriot Coal Shares Popped: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Patriot Coal (NYSE: PCX  ) is leading coal stocks higher today, rising as much as 10% in intraday trading.

So what: Deutsche Bank initiated coverage on Patriot Coal today with a "buy" rating, giving the stock a boost, but there is also positive dynamics for the whole industry. Flooding in Australia has pushed the Coal Stocks Index higher recently and is another catalyst for the coal move today.

Now what: As much as I don't like to agree with analysts, Patriot Coal and Deutsche Bank's other "buy," Walter Energy (NYSE: WLT  ) , should see some added demand in coming months. Eventually, the flooding in Australia will subside, so that extra demand will likely be somewhat short lived, but for the time being the stock run continues. I'll tentatively be bullish on today's news but keep an eye on the Australian flooding to see when their mines will start producing again.

Interested in more info on Patriot Coal? Add it to your watchlist.

Fool contributor Travis Hoium does not have a position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.

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Read/Post Comments (2) | Recommend This Article (3)

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  • Report this Comment On January 11, 2011, at 4:08 PM, lowpdop wrote:

    Considering PCX has 5 millions met tons unhedged for 2011 and 8 million met tons for 2012 unhedged and PCX received 140 per ton for 1 million tons of met coal in Sept (40-60 per ton above cost) well before rains and flood because there is huge increase in Met demand...this flood just accelerates earnings and expectations

    Even if PCX just received 140 per ton for the rest of their met coal which is now going for ~300 per ton they would see 2eps in 2011 and 3eps in 2012...not including the 4 million high grade thermal which they have unhedged for 2011 and 5 million tons of legacy contracts expiring over next 2 years, which by 2013 is estimted by the CEO to add another 200 million in EBTA at SEPT 2010 thermal prices.

    PCX compared to every other major coal producer with similar revenue, production and reserves with ~2eps currently trades in the 6-9 billion market cap range. PCX could well see 4eps in 2011 and 3-9eps in 2012 now with flood.

    PCX accent has just started...flood just makes more aware and escalates earnings well beyond what they need to justify a 50+ share price. And 50 per share is where PCX should be trading right now. ~20% short artificially suppressed share price much to long and allot of catch up to other coal companies is in order immediately.

  • Report this Comment On January 11, 2011, at 7:36 PM, tomd728 wrote:

    Mr. dop............

    Now that's the to post my friend !!!!!!!!!!!!!!

    And Thank You.

    While I could not post with your acumen I must say that the demand for product is going to outstrip any temporary shortage.

    Tom (CelticRiver)

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