Why Alpha Natural Resources' Shares Plunged

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: Shares of coal miner Alpha Natural Resources (NYSE: ANR  ) fell 10% today after the company posted a massive loss.

So what: Revenue rose 15% to $1.85 billion, but was below the $1.93 billion analysts had expected. On the bottom line, the company lost a whopping $2.2 billion, or $10.14 per share, driven by a writedown of the company's Massey Energy acquisition. Excluding one-time items, loss per share was $0.33, a penny below expectations.

Now what: When a company reports a loss that's bigger than its market cap, there's no way to sugarcoat it, things aren't going well. With all coal prices falling and Alpha Natural posting a big loss, writedown or not, I see no reason to buy shares here. Coal is fundamentally being removed from our electricity generation in favor of natural gas, and demand will never return to what it once was.

Interested in more info on Alpha Natural Resources? Add it to your watchlist by clicking here.

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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  • Report this Comment On August 08, 2012, at 4:13 PM, JJButlerISA wrote:

    The high cost and levered coal stocks are in trouble. They are moving capital equipment from mines they are closing to existing mine, and when the cycle turns they will find the low cost players have eaten their lunch!

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