JEFFERIES INITIATES COVERAGE ON ARCH COAL WITH BUY
Jefferies analyst Michael Dudas tells salesforce believes global coal patterns should allow coal prices to sustain higher than historic pricing levels and current valuations don't reflect robust earnings growth potential.
Specifically, for Arch Coal (ACI) ($60 price target), he expects margin expansion, FCF generation. With coal as the fastest growing global fuel, he thinks Peabody Energy (BTU) ($85) appears poised to benefit from increasing sales volumes, higher realized coal prices.
CONSOL Energy (CNX) ($90) is poised to generate significant earnings growth from well-capitalized resource base. Massey Energy (MEE) ($80) ranks as the largest, most diversified coal producer in Central Appalachia, and he expects the company to generate substantial margin improvement and free cash flow and EPS growth.
CITIGROUP REITERATES BUY, TOP-PICK ON POTASH
Citigroup analyst Brian Yu says Potash Corp. of Saskatchewan (POT) had repurchased a total of 10.9 million shares at the end of the second quarter, meaning nearly 5 million have been purchased so far in the third quarter.
Yu says management thinks the current stock price significantly undervalues the company's long-term potential. He notes the global economic situation, but says his recent analysis of nearly four decades of global grain demand data indicates that grain demand has rarely declined year-over-year absent a major supply shortfall.
He sees EPS of $13.00 for 2008 and $22.25 for 2009. He notes the recent sell off leaves POT shares trading at the lowest multiple in its public history. He has a $264 target price.