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Why Coal Stocks Were on Fire Today

By Travis Hoium - Apr 18, 2013 at 4:53PM

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Is this meaningful or just another movement?

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 miners Peabody Energy (NYSE: BTU) and Arch Coal (NYSE: ACI) were both up double digits for a period today after Peabody released earnings.

So what: Peabody's revenue was down 14%, to $1.75 billion, and the company lost $23.4 million, or $0.09 per share, in the quarter. Analysts expected $1.78 billion in revenue, and a $0.13 per share loss, so the bottom line was much better than expected.  

Now what: Coal stocks have been battered over the past few years, so investors are grasping for any positive news they can. I think it's positive that Peabody paid down $100 million of debt in the quarter, but let's not forget that the company still lost money, and coal demand is slowing overall. I'm definitely not buying this rally, and would use this as an opportunity to sell if I owned shares.

We'll see if Arch Coal made similar progress cutting costs when it reports earnings later this month. 

Interested in more info on Peabody Energy? Add it to your watchlist by clicking here.

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