By Dimitra DeFotis
Shares of metallurgical coal producer Walter Energy made up for some big recent losses Tuesday, jumping more than 16% following news it won?t refinance bank debt.
Walter Energy (WLT) stock closed up $1.93, or 16.5%, to $13.63 Tuesday. Walter stock has fallen 35% over the past month, more than twice the decline of the larger major U.S. coal players. ?Its market value is now near $852 million and more than a quarter of the shares were being sold short as of the end of May. But Morgan Stanley reiterated its $47 price target for Walter on Tuesday.
Another small metallurgical or ?met? coal producer,?James River Coal?(JRCC),?jumped Tuesday, up 9%.?Alpha Natural Resources? (ANR) rose 2.7%?and?Arch Coal?(ACI) ?rose nearly 4%. Shares of Peabody Energy?(BTU), the largest U.S. producer, were up fractionally. Bankrupt Patriot Coal (PCXCQ) rallied 12%.
Coal stocks have underperformed the broader market due to weak demand and prices, especially for met coal used in steel production. With prolonged weakness in the Chinese economy, the prolonged weak cycle is shining a light on some producers? balance sheets. Regarding Walter Energy, Morgan Stanley Analysts Evan L. Kurtz, Alexander S. J. Levy and Marcus Lindberg write that: