Is This the Dominant Player in Coal?

With shares of Alpha Natural Resources (NYSE:ANR) trading at around $7.69, is ANR an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for the Stock’s Movement

Peabody Energy Corp. (NYSE:BTU) is often referred to as the dominant player in coal, but realistically speaking, there is no dominant player in coal at the moment. If you look at the performances of coal stocks, they have each taken turns at being the laughing stock of the broader market. They trade together, and this hasn’t been a pretty sight as of late. An argument can be made for choosing one coal stock over the others, but we’ll get to that later. In the meantime, let’s take a look at Alpha Natural Resources.

Alpha Natural Resources relies heavily on acquisitions. It acquired Foundation Coal, which was a good decision as it led to a strong position in the Powder River Basin. On the other hand, Massey wasn’t a good acquisition, as it led to increased debt.

Overall, 2012 wasn’t a good year for Alpha Natural Resources. Freight and Handling revenues decreased 15 percent. Coal revenues decreased 2.8 percent. Other revenues decreased 22.9 percent. Coal Shipments increased 2.3 percent, but average per-ton realization dropped. Expenses increased by roughly $2.2 billion versus 2011. Alpha Natural Resources has an average target price of $10.83. Well…at least there’s some reason for optimism. Margins are very weak, and there is a 17.20 percent short position on the stock.

Let’s take a look at more important numbers prior to forming an opinion on this stock…